HCMC – Vietnam’s economic trajectory in the first quarter of this year indicates solid growth momentum, with gross domestic product (GDP) expected to grow by 5.5% year-on-year, according to a report of the United Overseas Bank (UOB).
The positive outlook comes on the heels of a robust recovery in the fourth quarter last year, where GDP growth accelerated to 6.72% year-on-year, largely driven by a rebound in manufacturing.
Policy support measures, including interest rate cuts by the State Bank of Vietnam, the central bank, contributed to the recovery despite the challenges faced in 2023. Vietnam’s GDP expanded by 5.05% in 2023, slightly surpassing UOB’s expectations.
While the first half of 2023 experienced slower growth at 4.14%, the recovery momentum appears to be on track based on data from January and February 2024.
Data from the General Statistics Office of Vietnam (GSO) showed a contraction in exports and industrial production in February 2024. Exports fell by 5% year-on-year, while industrial production contracted by 6.8% year-on-year.
These declines were attributed to the timing of the Lunar New Year holiday, which was in February this year compared to January last year. However, when considering combined data for January and February, exports rose by 17.6% year-on-year, and industrial production gained 5.7% year-on-year.
The purchasing managers’ index (PMI) for January and February 2024 exceeded the average reading for the same period in 2023, indicating optimism in both external trade and manufacturing.
UOB analysts expected this positive momentum to persist, especially in the second half of 2024, driven by the entrenched recovery in the semiconductor sector and global central banks’ shift toward accommodative policy.
While risks from external events, such as conflicts in Eastern Europe and the Middle East, continue to loom over global economic prospects, Vietnam’s outlook remains bolstered by the recovery in the semiconductor cycle, stable growth in China and the region, and favorable supply chain shifts toward Vietnam and ASEAN.
The Singapore-based bank maintains a growth forecast of 6.0% for 2024 for Vietnam, within the official target range of 6.0-6.5%.
However, in the first quarter of 2024, GDP growth is expected to ease to 5.5% year-on-year, primarily due to the effects of the Lunar New Year holiday, compared to 3.3% in the same period of 2023, UOB noted in its report.
Analysts anticipated inflation pressure to persist, forecasting the headline consumer price index to remain elevated at 3.8% in 2024, up from 3.25% in 2023.
