WB retains 2024 growth forecast for Vietnam at 5.5% despite Q1 surge

The World Bank has kept its growth projections for Vietnam’s GDP at 5.5% for 2024 and 6% for 2025, unchanged from its forecasts in October 2023, despite the country’s Q1 growth hitting a five-year high on a quarterly basis.

Vietnam’s 2024 growth projection is higher than 4.5% anticipated for East Asia & Pacific and trails behind Cambodia (6.1%) and the Philippines (5.8%) in Southeast Asia, the WB said in its “East Asia and Pacific April 2024 Economic Update” released Monday.

Vietnam last Friday announced that its Q1 GDP growth accelerated to 5.66%, the highest figure for the same period since 2020. The country’s economy expanded 5.05% last year.

Standard Chartered last week kept its 2024 GDP growth projection for Vietnam at 6.7%, with growth accelerating from 6.2% year-on-year in the first half to 6.9% in the latter half.

HSBC researchers in January reckoned that Vietnam was on track for a recovery, likely returning to its trend growth of 6% in 2024.

Vietnam-focused fund manager VinaCapital forecast the country’s GDP growth to accelerate to 6-6.5% in 2024, driven by a recovery in exports. This forecast is similar to the United Nations' projections in its World Economic Situation Prospects 2024 report.

In its latest report, the WB said China and Vietnam are the two countries where interest rates have recently been reduced due to weak domestic demand and distressed corporate sectors as policy rates have been raised in the East Asia and Pacific (EAP) region to address the threat of inflation.

Together with Indonesia, Philippines, Thailand, public investment in Vietnam generally supported economic activity during the pandemic and exceeded the pre-pandemic levels in terms of GDP share.

While output per capita has surpassed pre-pandemic levels in most of the larger EAP economies, recovery has been uneven across the region. Per capita output in Vietnam had already exceeded pre-pandemic levels in 2020 and is now about 15% higher.

The WB report highlights that evidence for EAP and other countries confirms that reducing barriers to competition in services spurs higher productivity growth in services sectors as well as in the manufacturing sectors that use these services.

Services reforms in Vietnam raised labor productivity of firms in services as well as downstream manufacturing. Following the country’s accession to the WTO in 2007, Vietnam has made noticeable progress to liberalize services trade.

Between 2008 and 2016, the services trade restrictiveness index (STRI) declined sharply in sectors such as finance, transport, and professional services. The liberalization led to a 2.9% annualized increase in labor productivity in these services sectors and a 3.1% increase in labor productivity in downstream manufacturing that used these services inputs.