HSBC Raises Vietnam's 2024 GDP Growth Forecast to 6.5%

HSBC has adjusted its forecast for Vietnam's GDP growth in 2024 to 6.5%, noting signs of widespread economic expansion. Besides trade, tourism-related services continue to show positive momentum, and long-term FDI prospects remain bright.

In a recent report, HSBC highlighted that after a somewhat disappointing first quarter of 2024, Vietnam's GDP growth accelerated to 6.9% year-over-year in Q2, surpassing market expectations.

Economic Rebound

Yun Liu, an economist at HSBC's Global Research, remarked that Vietnam's economy had been waiting for a significant boost, which has now arrived. The better-than-expected growth in the first half of the year prompted HSBC to raise its GDP growth forecast for 2024 to 6.5% from the previous 6%.

"Despite a slow start, Vietnam's GDP growth surged to 6.9% in Q2 2024, the highest in nearly two years, exceeding our expectations of 6%," said Liu.

This robust growth positions Vietnam to potentially reclaim its status as the fastest-growing economy in ASEAN, a title it ceded to Malaysia and the Philippines in the past two years. Manufacturing was a standout sector, growing by 10% year-over-year, driven by strong export performance, especially in electronics. Non-electronics sectors, including textiles and footwear, also showed significant recovery.

FDI and Tourism: Bright Spots

Alongside short-term trade gains, long-term FDI prospects are promising, with new manufacturing investments reaching nearly $10 billion in the first half of 2024, about 4% of GDP. Real estate also showed strong recovery after last year's downturn.

HSBC's report highlighted that tourism-related services remain positive, boosting sectors like transportation and accommodation. Vietnam attracted over 8.8 million visitors in the first half of 2024, surpassing 2019 levels.

Investments from mainland China, South Korea, and ASEAN countries, particularly Singapore, are noteworthy. For instance, CapitaLand plans to invest $110 million in Vietnam, supporting shifts in supply chains.

The Vietnamese government is considering a fund to support investments using additional revenue from a proposed 15% global minimum tax, which could further bolster economic growth.

Inflation and Economic Outlook

While Vietnam is on track to meet its goal of 17-18 million visitors in 2024, HSBC sees potential for further improvements, including expanding visa exemptions. However, retail sales growth has yet to return to pre-pandemic levels, lagging by around 10%.

Despite these challenges, the Vietnamese government has extended VAT reductions and other fee waivers, which should support domestic economic activities. HSBC projects that overall inflation, which stood at 4.3% in June, may have peaked and could average just over 3% in the second half of 2024, bringing the annual average to 3.6%.

Yun Liu concluded that HSBC expects the State Bank of Vietnam to maintain its policy rate at 4.5% for the year, despite potential concerns over foreign exchange rates.