HSBC maintains Vietnamese GDP growth projection at 6.5% this year

This represents the highest growth forecast that international organisations have given to the Vietnamese economy's outlook after typhoon Yagi.

Earlier on September 24, Singapore-based United Overseas Bank (UOB) moved to lower its growth forecast for the nation from 6% to 5.9% this year due to typhoon Yagi, while the Asian Development Bank (ADB) maintained its growth forecast at 6%.

Waiting for further lift

HSBC pointed out that Vietnamese economic recovery continues to firm up as the Year of the Dragon progresses. Growth improved, enjoying an annual increase of 6.9% in the second half of the year.

The recovery recorded in the external sector has started to broaden out beyond consumer electronics, although the pass-through to lifting the domestic sector still remains to be seen.

For one, the manufacturing sector has emerged strongly from last year’s woes. Purchasing managing indices (PMIs) have also registered five consecutive months of expansion, while industrial production (IP) has registered a bounce-back in activity for the textiles and footwear industry as well.

This in turn has supported robust export growth, keeping it in double digits, with structural forces such as expanding market access for Vietnamese agricultural produce also underway.

However, the domestic sector is recovering more slowly than initially expected, with retail sales growth still below the pre-pandemic trend. Encouragingly, the Government has put in place measures in support of a wide range of domestic sectors which is expected to shore up confidence moving forward.

Environment tax cuts on fuel and value-added tax cuts for certain goods and services will last until the end of the year, while the revised Land Law effective from August will buttress the outlook for real estate. Albeit still early, the latter seems to have already contributed to a boost in foreign investment in the sector, with recent FDI showing broad-based gains, according to think tanks.

Regarding inflation, price developments are turning more favourable in the second half of the year, particularly as unfavourable base effects from energy have faded. An expected Fed easing cycle will also help to further alleviate some exchange rate pressures.

Taking all of these factors into consideration, experts maintain their inflation forecasts at 3.6% this year, well below the State Bank of Vietnam’s target ceiling of 4.5%. For 2025, they keep their inflation forecast at 3.0%.