Vietnam potential for growth promising for 2024, 2025: UOB exec

Vietnam's GDP in 2024 can reach 6% with "upside potential", driven by strong performance across industries like manufacturing, electronics, furniture, and motor vehicles, says Suan Teck Kin, head of research at UOB.

The country's potential for growth, especially compared to the slower growth of 5% in 2023, is promising for both 2024 and 2025, the Singaporean bank's executive noted in a Friday release.

"Despite some global challenges such as high interest rates and slower demand in developed markets, Vietnam's Purchasing Manager Index (PMI) stands out as one of the highest in Asia, indicating continued expansion," he commented.

According to S&P Global, Vietnam's PMI was unchanged at 54.7 in July, the fastest since November 2018, signaling a further marked strengthening of business conditions in the local manufacturing sector,

In their latest forecasts, Shinhan Bank Vietnam, the World Bank and HSBC said the country's economic expansion could be 6%, 6.1%, 6% and 6.5% this year, respectively. The estimations were within the Vietnamese government’s target of 6-6.5%.

Vietnam’s GDP growth reached 6.93% in the second quarter of 2024 and 6.42% in the first half of 2024, General Statistics Office (GSO) data shows.

Suan Teck Kin also highlights Vietnam's growing exports, especially in electronics and mobile phones.

"The semiconductor cycle is rebounding due to AI advancements and increased demand for electronic devices. Vietnam's large population also contributes to this economic momentum. Industry and services continues to play critical roles in the country's growth," he said.

Vietnam's trade activity in 2024 has shown significant recovery, especially in exports and imports, surpassing the declines experienced in 2023.

The executive also noted the positive trend of FDI into Vietnam suggests continued investor and business confidence in the country's competitiveness and potential.

FDI in Vietnam has seen two consecutive years of record-high inflows. In the first seven months of this year alone, the country attracted $12.55 billion in realized FDI, with strong investment from economies like Singapore, mainland China, Hong Kong, and Japan.

The retail sector, after suffering during Covid-19, has recovered well across various segments, indicating a broader economic recovery, Suan Teck Kin observed.

But he cautioned inflation remains a concern, with the latest figure around 4% year-on-year, close to the central bank’s target of 4.5%. Core inflation, which excludes food and energy, is decreasing, but overall inflation is driven by rising food and housing prices.

"Inflation in Vietnam is expected to remain around 4% through the end of the year due to base effects, which may prevent the central bank from lowering interest rates. The focus is on managing inflation and supporting the Vietnamese dong," he argued.

Suan Teck Kin forecasts the Vietnamese dong would strengthen further. It has started to strengthen back to the stronger side of 25,000 against the U.S. dollar. "Going forward, the VND is expected to strength gradually towards 24,100 against the USD by 2025."

Shinhan Bank in mid July said the exchange rate in Vietnam peaked at VND25,352 per U.S. dollar in Q2/2024, and could appreciate to VND25,280 and VND24,980 on average in Q3 and Q4 this year, respectively.