Economic Outlook for Vietnam 2024: Promising Start and Continued Export Growth

According to HSBC, the Vietnamese economy is off to a prosperous start in 2024, with exports continuing to recover despite the underlying effects of the Lunar New Year.


Strong surge in exports

In the report “Vietnam at a glance: “Consumer pulse” just published, HSBC Global Research department evaluates that Vietnam has started 2024 with signs of a strong and steady economic recovery. Accordingly, in January, despite the impact of the base effect, Vietnam’s trade continued to remain resilient on the path of recovery. Exports surged at an astonishing rate of 42% compared to the same period last year, thanks to the stable recovery in electronic exports. Furthermore, the high volume of pre-orders for the new Samsung Galaxy S24 smartphones also somewhat contributed to the optimistic situation.

Moreover, the optimism is not limited to the electronics industry as exports are recording high growth across multiple sectors. Sectors that have experienced sluggishness in 2023 such as textile, machinery, and wooden furniture have started to show significant growth again. However, HSBC experts still advise Vietnamese businesses to remain cautious during this early stage of trade recovery.

Exports in January increased by 42% compared to the same period last year

Additionally, the Purchasing Managers’ Index (PMI) for January shows a certain cautious optimism. Encouragingly, the final PMI also returned to above 50 after 5 months of decline. However, new orders and new export orders continue to increase significantly but are still not enough to stimulate businesses to increase hiring. In particular, the slow delivery situation further increases manufacturing cost pressures, reminding of the risks posed by the prolonged Red Sea disruptions.

Furthermore, inflation remains under control, in which core inflation in January decreased slightly by 3.4% compared to the same period last year. Although much lower than the government’s inflation target for 2024 at 4%-4.5%, there are still noteworthy risks of inflationary increases that cannot be overlooked.

Joyful in the new year of

After a challenging year of Quy Mao, Vietnam’s outlook is expected to improve in the year of . HSBC states: “Vietnam – the land of a thousand years of civilization has had a successful start to the economic recovery. However, we need to be cautious about the overall recovery level because the export machine needs to be further supported by growth in major world economies,” HSBC experts noted.

HSBC experts analyze that while export cycles still need to be closely monitored, equally important is the assessment of domestic demand. Currently, domestic demand is facing increasing pressure but is expected to improve, the initial sign of which is some consumer stocks showing recovery.

Currently, domestic demand is facing increasing pressure

In fact, Vietnam has a large consumer proportion accounting for over 50% of GDP. Growing at an average annual rate of 7.5% prior to the pandemic, personal consumption has decreased significantly since the outbreak, except for the reopening period in 2022. In particular, personal consumption growth halved in 2023, reflecting the significant impact of the economic slowdown on households.

One reason is the effect of asset value fluctuations due to the weakening real estate sector in cycles, while the other is significant changes in consumer behavior since the pandemic. Consumers tend to be cautious about economic fluctuations, thus increasing the tendency to save.

This is further ensured when looking at the Vietnamese labor market. While the unemployment rate remains low at 2.3%, employment growth slowed down in 2023 and has not fully recovered.

“Clearly, Vietnam is eagerly awaiting a cyclical recovery in global trade, which is the main hope for the job market. Fortunately, the electronics industry has recently seen some positive signs, indicating that the darkest period of the trade sector has passed. However, each industry is different as the recovery is not happening uniformly. Industries that provide large employment such as textiles, apparel, and footwear are still not completely out of the difficult period. Asia is still in the early stages of trade recovery, as we need more evidence to see a stable recovery supported by strong support from major world economies,” analyzed HSBC experts.

Good news for Vietnam, complete recovery in the tourism sector is also crucial to the labor market, supporting workers in the service industry. Thanks to favorable policies extending the visa-free stay for tourists from some countries and granting e-visas to citizens of all countries since mid-August 2023, Vietnam welcomed around 12.6 million international visitors, far exceeding the initial target of 8 million visitors.

The favorable prospects even prompted the Vietnam National Administration of Tourism to set an ambitious target for 2024 of 17-18 million foreign visitors, nearly reaching the record high of 2019, aiming for total revenue of 840 trillion VND (8% of GDP), surpassing the 2019 level. Based on previous trends, this implies that international tourism in 2024 is likely to account for about 4% of GDP, equivalent to the pre-pandemic average of Asia.

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