According to the bank, Vietnam’s economic recovery continues to firm up as the Year of the Dragon progresses.
The country’s growth improved and surprised on the upside in the second quarter of 2024, rising 6.9% year-on-year. The recovery 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.
The manufacturing sector has emerged strongly from last year’s woes. Purchasing Managers' Indexes (PMIs) have 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 has supported robust export growth at double digits, with structural forces, such as expanding market access for Vietnamese agricultural produce, also underway.
However, HSBC noted that 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 to support a wide range of domestic sectors that is expected to shore up confidence with time.
Environment tax cuts on fuel and value-added tax cuts for certain goods and services will last until year-end 2024, while the revised Land Law effective from August will buttress the outlook for real estate.
The bank showed its confidence that the potential upside risks can offset the temporary economic disruptions from Typhoon Yagi.
Regarding inflation, it said that price developments are turning more favourable in the second half of this year, as unfavourable base effects from energy have faded. An expected Fed easing cycle will also help to alleviate some exchange rate pressures.
“Taking all these into consideration, we maintain our inflation forecasts at 3.6% in 2024, well below the State Bank of Vietnam’s target ceiling of 4.5%. For 2025, we keep our inflation forecast at 3.0%,” according to the report.
Recently, the Asian Development Bank (ADB) maintained its positive economic outlook for Vietnam, forecasting the country’s GDP growth at 6% in 2024 and 6.2% in the following year.
Meanwhile, Singapore-based United Overseas Bank (UOB) revised forecast for the nation’s economic growth down to 5.9% for 2024 from the previous 6.0% due to the impact of Typhoon Yagi.
