Maintaining Vietnam’s Economic Growth Trajectory: UOB’s Outlook for 2024 and Beyond
Building on the steady growth momentum in Q3 2024, UOB forecasts Vietnam’s economy to continue performing well in Q4. Consequently, Vietnam’s GDP growth is projected to reach 6.4% in 2024 and further increase to 6.6% in 2025.
GROWTH TRAJECTORY ON TRACK
According to UOB, Vietnam’s actual GDP growth in Q3 2024 outperformed expectations, surging 7.4% year-on-year. This surpasses the market average forecast of 6.1% and UOB’s previous projection of 5.7%.
“This is the highest growth rate since Q3 2022, when economic activities rebounded strongly from the pandemic trough. The latest result has contributed to a cumulative growth of 6.82% year-on-year for the first nine months of 2024,” UOB analysts remarked.
They noted that despite the storm’s impact on key sectors, agricultural, forestry, and fishery production in Q3 2024 still increased by 2.6% year-on-year.
Notably, industrial production continued to accelerate, rising 11.4% year-on-year, up from 10.4% in Q2 2024. The services sector expanded by 7.5% year-on-year, following a 7.1% increase in Q2.
In Q3 2024, the services sector was the primary driver of GDP growth, contributing 3.24 percentage points, followed by industry and construction with 3.37 percentage points. These two sectors accounted for 89% of the overall 7.45% growth.
Concurrently, the latest data also indicates that Vietnam’s growth trajectory remains on the right path. As of October, Vietnam’s exports surged 14.9% year-on-year, sustaining double-digit growth so far.
For the full year 2024, UOB forecasts Vietnam’s exports to increase by 18%, marking the strongest year since 2021.
Additionally, imports rose 16.8% year-on-year during the January-October period, resulting in a trade surplus of $22.3 billion in the first ten months. This is the second-highest trade surplus recorded after the $28 billion surplus in 2023.
Foreign direct investment (FDI) inflows continued to expand, with registered FDI reaching $27.3 billion in the first ten months of 2024, 2% higher than the same period in 2023.
Domestically, retail sales growth in 2024 has largely remained stable, with a 7.1% increase in October and an average growth of 8.5% year-on-year from the beginning of the year. This is partly supported by a 41% surge in tourist arrivals, totaling 14.1 million visitors from January to October.
“The increase came from top tourism sources, including South Korea, China, Taiwan, the US, and Japan. However, compared to the pre-COVID-19 boom in 2019, tourist arrival data is still lagging and may need another year or two to return to pre-pandemic levels,” UOB analysts commented.
Considering these factors, UOB maintains its 2024 economic growth forecast for Vietnam at 6.4%, with Q4 2024 growth expected to reach 5.2% year-on-year.
GDP GROWTH PROJECTED AT 6.6% IN 2025
For 2025, UOB predicts a growth rate of 6.6%. According to UOB, the Vietnamese National Assembly has set a GDP growth target of 6.5-7.0% for 2024 and 2025, while “aspiring” to achieve 7.0-7.5%.
“However, with the US transitioning into a new presidential term, potential global trade tensions and risks may emerge soon,” UOB analysts cautioned.
A significant risk to note is the potential trade restrictions on Vietnam, as the US trade deficit with Vietnam has more than doubled from $39.5 billion in 2018 to nearly $105 billion in 2023.
Moreover, UOB analysts suggested that with the economy remaining robust this year and extending into 2025, the State Bank of Vietnam would not be under significant pressure to hastily loosen its policies.
Currently, the inflation rate remains below the 4.5% target since June 2023, alleviating much of the pressure on policymakers.
“With global trade tensions expected to escalate further under President Donald Trump and the strengthening US dollar a growing concern, the State Bank of Vietnam will need to be mindful of the depreciation pressure on the VND. We anticipate the refinancing rate to remain at 4.5%,” UOB analysts forecasted.
Consequently, despite its solid fundamentals, the VND is constrained by external factors, such as the US dollar’s recovery as the market reprices a scenario of fewer Federal Reserve rate cuts during the Trump 2.0 term.
Unlocking Vietnam’s Economic Potential: Vietstock LIVE #14: Vietnam 2025 – Opportunities and Challenges
Vietstock LIVE #14, themed ‘The Vietnamese Economy in 2025: Opportunities and Challenges’, will offer investors a comprehensive overview of the prospects and potential pitfalls facing the nation’s economy in the coming year. The show will be streamed live at 3 PM on Friday, December 6, 2024.
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