According to HSBC Vietnam's 2024 macroeconomic assessment, after a difficult start to the first quarter, the economic picture has been mostly positive over the months. Despite Typhoon Yagi, Vietnam's economy has recovered and accelerated in the second half of the year, led by the manufacturing sector.
The index of industrial production (IIP) in 11 months increased by 8.4% over the same period in 2023, contributing to strong double-digit export growth (14.4%).
Encouragingly, trade initially picked up in electronics and then expanded, with textile and footwear exports rising 16.7% in the third quarter. Manufacturing has emerged from last year’s slump in a big way.
Attracting foreign capital remains basically positive. FDI disbursement in the first 11 months is estimated at 21.68 billion USD, up 7.1% over the same period last year. This is the third consecutive year that Vietnam has achieved FDI disbursement of over 20 billion USD.
After GDP unexpectedly increased by 6.9% in the second quarter and 7.4% in the third quarter, HSBC believes that Vietnam's growth will reach 7% in 2024, the highest among the six largest economies in Southeast Asia (along with Indonesia, Malaysia, the Philippines, Singapore and Thailand). Thus, this year, Vietnam is likely to "return as a growth star", after the Philippines led the region last year.
HSBC forecasts that Vietnam's GDP will continue to maintain the highest level in the region in 2025. While the growth target for 2025 assigned by the National Assembly to the Government is 6.5-7%, striving for 7-7.5%. According to HSBC experts, there is a basis for this expectation in the context of favorable production and export.
HSBC warns of some risks for next year. How much demand improves will be key to determining the strength of the recovery, as Western markets account for nearly half of Vietnam’s exports. Therefore, the trajectory and pace of consumer spending in these markets will need to be closely monitored.
It is too early to assess the specific impact of US trade policies in the coming time. However, any policy will have an impact on ASEAN, including Vietnam, in different forms, according to the expert group.
Vietnam's garment and footwear exports to the US account for more than 40% and 33%, respectively. Europe is the second largest market for these products, but it is difficult to fully absorb them in the short term. However, Vietnam can hedge against potential tariff risks from the US in the medium to long term through its many free trade agreements (FTAs).
In addition, the exchange rate may recur, which is a matter of concern. Vietnam was labeled a "currency manipulator" by the US Treasury Department in December 2020, before being removed from the list in April 2021. However, Vietnam remains on the US Treasury Department's most recent monitoring list, meaning that trade data needs to be closely monitored.
The USD’s performance is also a factor to consider for the upcoming exchange rate trend. With an uneven recovery and a high growth target for next year, HSBC expects the State Bank to maintain a flexible monetary policy, keeping the operating interest rate unchanged at 4.5% until the end of 2025.
According to VinaCapital, 2025 will be a volatile year for Vietnam’s economy and stock market. In the first half of 2025, the decline in exports is likely to have a stronger impact on Vietnam’s GDP growth than many economists expect. This decline is likely to prompt the government to take drastic actions to support the economy, especially in the context of high GDP growth targets.
In the short term, the government is likely to spend more on infrastructure development, thanks to its strong fiscal position (public debt is currently below 40% of GDP). VinaCapital expects the government to take concrete steps to support the real estate market next year. The lengthy planning and project approval process is the biggest barrier to boosting real estate development, but VinaCapital has heard on the ground that some project approvals are now being accelerated.
In addition to measures to boost Vietnam’s short-term growth, the government is also taking steps to boost long-term GDP growth. These include structural reforms, some of which will take effect next year and could help cool the property market and improve the country’s ranking on the ease of doing business index.
