Vietnam’s GDP growth to accelerate to 5.8% in 2024: Maybank Securities

Local consumption, real estate market recovery and rebounding exports will contribute to Vietnam’s GDP growth of 5.8% this year, said Singapore-headquartered Maybank Securities Pte. Ltd in a report named "Year ahead 2024: A year of two halves."

Steady economic growth expected throughout 2024

While government expenditure (+44% in 9M23) was the main driver for the economy in 2023, we expect local consumption to regain the spotlight in 2024 thanks to re-strengthening of exports and a heathier financial situation among households. Meanwhile, the real estate market is gradually recovering, and the upcoming wave of equity issuances (if successful) would be a boost for the sector. Unlike the bumpy road in 2023, we forecast steadier economic growth in 2024. We forecast Vietnam’s GDP growth to accelerate to 5.8% year-on-year in 2024 from 5.05% in 2023.

Economic recovery gathering pace

Vietnam’s economic recovery post re-opening encountered speed bumps in 2022-23 due to a regulatory crackdown on the local bond market and global headwinds of a strengthening USD since late-2022. An array of supportive fiscal and monetary measures such as tax exemption, reduction and deferment, a ramp up of infrastructure spending, and policy rate cuts implemented during the depths of Covid-19 were re-introduced in the first half of 2023 (1H23). Although the ripple effect of USD strengthening and the spillover of the liquidity crunch among local real estate developers still burdened corporates as well as consumers in 2023, we can see economic green shoots thanks to government spending.

For 2024, we expect the economy to see a steadier recovery, driven by consumption as exports gain momentum, consumers’ financial situation is healthier while equity issuances of real estate developers, if successful, would be a boost for the sector’s ongoing recovery.

Rebounding exports

As Vietnam is one of the most open countries in the world (external trade equals 200% of GDP), exports generate one of the main income sources for local consumers. This partly explains why domestic consumption weakened for most of 2023 as exports contracted 4.4% year-on-year in 2023. However, on a monthly basis, we can see gradual improvement as exports grew 13.1% year-on-year in December 2023, the fourth month of growth in a row, and the absolute level is on the way back to the peak seen in 1H22.

Looking ahead, we have a brighter outlook for 2024 given five drivers: strong U.S growth, driven by aggressive fiscal policy and more forceful industrial policy; rotation to consumption of goods as “revenge spending” in domestic services fades; global electronics recovery; depletion of U.S retail inventory; and bottoming of global commodity and chip prices will lift export earnings.

Broadly speaking, the Eurozone economy is picking up steam, China’s growth is likely to be moderate going forward and the U.S is forecast to experience a soft landing in 1H24, according to Bloomberg consensus. These economies are the three largest importers of Vietnamese products and their recoveries will greatly benefit Vietnam’s trade and economy.

Consumer financials improving

In combination with pent-up demand post-Covid reopening, the booms in the capital and real estate markets lifted consumer confidence and thus boosted consumption of discretionary goods (such as mobile phones and cars etc) to all-time highs in 2022. Then the inevitable busts of these markets reversed the wealth-effect, causing local consumption to suffer a double-digit decline in 2023.

Yet, looking at the current trend of personal income and savings, we believe the long-term potential of local consumption remains unwavering.

Real estate gradually recovering and waiting for a boost from equity issuance

In 2023, Vietnam’s real estate market suffered the worst setback in over a decade. Only 3,000 condominiums or house construction permits were issued in three quarters in 2023 vs 125,000 at the peak of the market three years earlier.

Supportive policies together with market dynamics (the real estate market is still in the early upswing phase of its long-term cycle) are reviving the market. The number of land transactions in Lam Dong province, one of the hottest spots during the 2020-2022 property bubble, increased for the third quarter in a row in Q3 2023. Similarly, condominium transactions in Ho Chi Minh City, the economic hub of the country, are also recovering markedly.

Vietnam's GDP growth is forecast by VinaCapital at 6.5% and United Nations at 6%.