HSBC pegs Vietnam’s growth at 6% this year.(Photo: VietnamPlus)
Vietnam is on track to see better growth prospects in 2024, but it will take time for the recovery to broaden out, according to HSBC.
In latest report “Vietnam at a glance: keep calm and carry on”, the bank also maintains GDP growth forecast for Vietnam at 6% this year.
According to Yun Liu, an economist in charge of ASEAN markets for the Global Economic Research Division at HSBC, despite an uneven recovery in services, the external-facing manufacturing sector is returning to its past glory. Exports expanded by over 14% year-on-year in March, bringing quarterly growth to 17% year-on-year. This was largely driven by an upturn in the electronics cycle, benefiting from being a key production hub for Samsung’s smartphones.
Aside from electronics, exports rebounded and were broadened out to other shipments, including textiles and footwear, though their contributions are still minimal. While import growth also rebounded to double-digit in the first quarter of this year, trade surplus increased to 8 billion USD, exceeding 2023’s monthly average by over 10%.
While near-term trade is about to take off again, long-term FDI prospects remain a bright spot.
From January to March, greenfield FDI rose almost 60% year-on-year, 65% of which is concentrated on the pillar manufacturing sector and the rest on the real estate.
Looking at the source of investors, Singapore has regained the crown as Vietnam’s largest FDI provider, with an impressive share of 50%, Yun said.
Foreigners visit Hanoi (Photo: VietnamPlus)
HSBC researchers said that Vietnam’s GDP expanded in the first quarter of this year by a slower-than-expected pace of 5.7% year-on-year, undershooting HSBC and market expectations of 6.4%. This does not mean that the recovery is derailed but Vietnam remains firmly on a rebound path, led by better trade prospects.
The biggest downside came from the services sector, which only expanded by 6.1% year-on-year in the first quarter of 2024, they noted, adding that there continued to be a pergence in the recovery, with domestic-oriented sectors lagging behind external-facing sectors.
Information and communications, financial, and professional services have slowed from the fourth quarter of last year, and the real estate sector’s contribution remained minimal, reflecting ongoing weakness in the property cycle. Meanwhile, retail sales growth has not returned to the pre-pandemic trend. While Vietnam’s export cycle has started to see signs of recovery, it has not translated into a meaningful boost to its domestic sectors.
However, tourism-related services continued to enjoy the positive momentum. For the first time since the outbreak of the COVID-19 pandemic, Vietnam’s monthly inbound tourists approached close to 1.6 million, exceeding pre-pandemic levels by 13%.
Inflation rose 4% month-on-month in March. (Photo: VietnamPlus)
After Singapore became the first Association of Southeast Asian Nation (ASEAN) country to see an almost full return of Chinese tourists in February, Vietnam is racing closer, with the recovery rate hiking to 90% in March. This is partially attributed to Vietnam’s ongoing efforts to restore direct flights with China, which has approached almost to 80% of pre-pandemic levels. While Chinese outbound tourism to ASEAN has seen a positive pick-up, there is still room for further improvement, they said, elaborating that an expansion in the visa exemption list is under consideration by the authorities.
The HSBC experts also said that headline inflation in March witnessed a decrease of 0.2% compared to the previous month due to price adjustments during the Tet holidays, resulting in a year-on-year inflation of 4.0%. Although this was below HSBC and market expectations of 4.2%, it continued to increase.
While monthly food prices fell, rice inflation remains elevated at double-digits. Vietnam has been urged to remain cautious on upside risk to food and energy inflation, they said, adding that they expect the State Bank of Vietnamto hold its policy rate steady at 4.5% through 2025./.