UOB ups Vietnam’s 2024 GDP growth forecast to 6.4%

UOB released its update after Vietnam surprisingly announced its GDP growth of 7.4% in the third quarter and 6.82% in the first three quarters of the year, though it bore the brunt of typhoon Yagi in early September.

Yagi pounded northern Vietnam on September 6, triggering subsequent flash floods and landslides. The natural disasters caused an economic loss of more than US$3 billion.

The bank attributed Vietnam’s positive economic growth in the last quarter to the strong recovery of business activities following the COVID-19 pandemic.

Manufacturing and services continue to be the primary drivers of business activities, while foreign trade maintained strong momentum in the third quarter. The increase in sales in the semiconductor industry since mid-last year indicates that this growth trend is likely to be sustained in the upcoming quarter.

According to the UOB report, the inflation rate slowed down to 2.6% in September compared to 3.45% recorded in August, as food prices, housing costs, and others continued to decline slightly. The third quarter of 2024 saw the consumer price index (CPI) fall to 3.5%, down from 4.4% in the second quarter. The average CPI increase so far has slowed to 3.9% year-on-year, down from a peak of 4.1% in July, which is lower than the State Bank’s target of 4.5%.

Other data from the third quarter of 2024 also reflect the overall resilience of the economy. Both exports and imports recorded growth rates of 10.7% and 11.1% year-on-year, respectively, in September, extending the trend of double-digit growth for the seventh consecutive month in 2024.

The latest Purchasing Managers’ Index (PMI) for Vietnam sharply declined to 47.3, marking the first time it has recorded a fall after five months of expansion in a row. This trend raises concerns about the country’s production capacity and supply chains, as well as the recovery of the agricultural and services sectors, in light of the disruptions caused by Typhoon Yagi.

These disruptions, according to UOB experts, are likely to be more pronounced in the October-November period. As a result, growth in the fourth quarter is forecast to slow to 5.2% year-on-year, down from 7.4% in the third quarter.

The bank also retained its 2025 GDP growth forecast of 6.6% for Vietnam, reflecting the anticipated increase in output at the beginning of next year to compensate for the losses incurred from Typhoon Yagi, as well as the spillover effects from the US Federal Reserve’s easing policies and China’s economic stimulus measures.