Vietnam’s 2025 economic expansion likely 7%: UOB

Singaporean bank UOB has raised its forecast for Vietnam’s GDP growth in 2025 to 7% from 6.6% last October.

The prediction took into account the strong momentum carried over from 2024 as well as risks and potential downside from the new US administration's further trade frictions, the bank noted in a release on Thursday.

"We expect positive momentum from domestic drivers such as production, consumer spending, and visitor arrivals to contribute to the activities especially in the first half," reads the release.

The National Assembly, Vietnam's legislature, has set a growth target of 6.5-7% for 2025, while Prime Minister Pham Minh Chinh recently called for an at least 8% expansion with the help of faster public disbursement to boost infrastructure and attract more investments.

"Based on the disciplined approach to its fiscal stance and the way public expenditure has been disbursed so far, the 8% goal seems overly ambitious but there are still merits of it being reached," the bank commented.

However, uncertainty on trade outlook will be a major risk for Vietnam in the second half, with its rising dependence on exports, which have grown to record high of more than $400 billion in 2024, just about the size of Vietnam’s nominal GDP of $450 billion, according to the bank.

On a more positive note, UOB expects the U.S. government to impose additional tariffs at a more measured and paced manner.

Vietnam’s GDP growth reached 7.09% in 2024, the General Statistics Office (GSO) reported. The figure is higher than the 5.05% in 2023 and the results of the three years heavily impacted by Covid-19 (2.58% in 2021, 2.91% in 2020, 7.02% in 2019).

Both manufacturing and services sectors continued to be the main drivers of growth, while external trade maintained its strong pace through 2024. The upswing in semiconductor sales since mid-2023 suggests that momentum is likely to continue further in the 1-2 quarters ahead.

With overall and core inflation staying below official target of 4.5% for most of 2024, particularly towards the later part of the year, this has opened up the possibility for the State Bank of Vietnam (SBV) to ease its policy stance, UOB said.

"Given the uncertainty ahead on the U.S. Fed policy trajectory and geopolitical/trade tensions after U.S. President Trump takes office, we expect the SBV to keep its main policy rate steady for now, with the refinancing rate held at 4.50%."

The VND has weakened against the US dollar, along with other Asian currencies, since late Q3/2024 amidst the heat of the US presidential election. The VND ended 2024 at the record low of $25,485, for a 5% drop in the full year and the third consecutive annual decline, according to UOB.

"Given the external headwinds are not likely to dissipate in the near term, the VND looks set for further losses against the USD. Overall, we pegged USD/VND forecasts at 25,800 in Q1/2025, 26,000 in Q2/2025, 26,200 in Q3/2025, and 26,000 in Q4/2025," it added.

VND depreciated about 5.03% against the U.S. dollar in 2024, according to Dao Minh Tu, SBV Deputy Governor.

Vietnam’s GDP growth can reach 6.5% in 2025, continuing to outperform regional peers in the ASEAN-6 group, Oxford Economics said in a report released on December 16.

The Asian Development Bank's (ADB) prediction is 6.6%, mentioned in the December edition of its Asian Development Outlook (ADO).

VinaCapital, among the biggest foreign-run asset managers in Vietnam, forecast the economy will expand 6.5%, while Standard Chartered expects a 6.7% expansion.