Vietnam's GDP growth forecast raised due to strong recovery trend

Production activities at the Electrical Wire Manufacturing Plant of Automotive Systrems Vietnam Co. LTD (Thanh Hoa). Illustration: Dao Nguyen

Forecast growth rate of 6.8 - 7%

According to experts, after a "difficult" year of 2023 and the first quarter of 2024, and having to suffer damage from super typhoon Yagi, Vietnam's GDP in the third quarter of 2024 increased by 7.4% compared to the same period last year, exceeding most forecasts of many international organizations. On this growth momentum, these organizations have all raised Vietnam's economic growth outlook in 2024 compared to previous forecasts.

In the latest economic update report on Vietnam, Standard Chartered Bank has adjusted its growth forecast. Standard Chartered forecasts Vietnam's GDP growth in 2024 to reach 6.8% (from 6%) thanks to better-than-expected GDP results in Q3/2024. Growth in Q4/2024 is expected to be 6.9%, retail sales are likely to reach 6.2%, and exports are likely to reach 6.2%. Imports and industrial production are likely to increase by 4% and 9.2%, respectively. GDP forecast for 2025 remains at 6.7%, with growth expected to be 7.5% in the first half and 6.1% in the second half compared to the same period last year.

Economists at Standard Chartered Bank said that Vietnam's economic growth momentum is relatively strong, with better improvements in many areas, including import and export, retail, real estate, tourism, construction and manufacturing. The recovery in trade and increased business activity, along with foreign direct investment, will be the main growth drivers in 2025 and beyond.

Mr. Tim Leelahaphan, economist for Thailand and Vietnam (Standard Chartered Bank), commented that although short-term economic pressures in Vietnam may still exist, Standard Chartered believes that the economy's performance is better than market expectations. The Government's push for stronger economic growth may support maintaining low interest rates in the near future.

Besides Standard Chartered, many international organizations have also raised their forecasts for Vietnam's GDP growth in 2024 compared to their previous assessments. HSBC's global research division has raised its forecast for Vietnam's GDP growth in 2024 to 7% compared to its previous forecast (6.5%). This is also the highest level in the Southeast Asian region that this organization has given to economies.

UOB Bank (Singapore)'s Global Economics and Market Research has also revised up its growth forecast for Vietnam in 2024 to 6.4% (from the previous forecast of 5.9%). UOB said that Vietnam's real GDP in the third quarter of 2024 reached the highest growth rate since the third quarter of 2022, when activities recovered strongly after the pandemic-induced recession.

Also raising the growth forecast for Vietnam compared to previous forecasts, VNDirect Securities Joint Stock Company forecasts that Vietnam's growth could reach the GDP growth target of 6.5-7% this year.

VNDirect believes that Vietnam's economy will continue to maintain strong growth momentum in the fourth quarter of 2024 with GDP forecast to increase by 7.1%, mainly thanks to positive production and export activities; abundant FDI inflows; recovery of the real estate market and the Government’s growth support measures, including monetary and fiscal policies.

“Therefore, we raise our 2024 GDP growth forecast for Vietnam to 6.9% from the previous forecast of 6.7%, reflecting the higher-than-expected growth in Q3/2024 and expectations of positive growth in Q4/2024,” VNDirect’s report stated.

Xuan Thao Chart

Expectations for continued strong growth in 2025

VNDirect also forecasts that Vietnam's GDP will continue to grow by 6.9% in 2025 thanks to the global trend of monetary policy easing; positive prospects for Vietnam's manufacturing and export sectors; continued improvement in domestic consumption demand and gradual recovery of private investment.

According to VNDirect, 2024 marks a significant change in global monetary policy, witnessing 150 interest rate cuts compared to only 23 interest rate hikes. This easing trend is taking place in most major central banks, including the US Federal Reserve (Fed), the European Central Bank (ECB) and the People's Bank of China (PBOC).

The global monetary policy easing trend is expected to continue until at least 2025, as inflation in developed countries gradually approaches central banks’ targets.

This will open up more room for the State Bank of Vietnam to conduct monetary policy in a growth-supporting direction in the coming period, including promoting money supply growth through purchasing foreign exchange reserves and maintaining or even slightly reducing the operating interest rate to keep market interest rates low, thereby promoting credit growth.

In addition, the global easing credit environment will also boost cross-border investment activities and strengthen the prospects for not only foreign direct investment (FDI) but also foreign indirect investment (FII) in Vietnam in 2025. FDI inflows into Vietnam are also expected to remain positive in 2025, with a growth rate of 8-9%, while import-export value grows by 9-10% thanks to the stable global economic outlook and the gradually easing credit environment.

Assessing the economic situation in Vietnam in 2024 and forecasting the outlook for 2025, Dr. Nguyen Huu Tho, Head of the Economic Analysis and Forecasting Department, Central Institute for Economic Management (CIEM), said that in addition to the achievements such as: regaining growth momentum as before the Covid-19 pandemic, the highest growth in the ASEAN region, the domestic economic sector is still not strong enough to reach out to the international market, the structural shift towards modernization is still slow, the economic "locomotives" are tending to slow down (Ho Chi Minh City, Hanoi, Binh Duong ...). In addition, because Vietnam is a country with an economy deeply integrated with the world, developments in the world economy will greatly affect the Vietnamese economy in 2025.

Accordingly, the world trend in 2025 will be closely related to geopolitics, may still be unstable, unpredictable, and somewhat more complicated, leading to economic trade with Vietnam's 5 major partners having both advantages and difficulties.

Factors such as the business sector, the State, FDI capital, and the domestic market have not yet grown strongly due to many obstacles in development institutions, resources, and infrastructure that are not yet commensurate, etc. From the analysis of trends in 2025, to solve the above problems, Dr. Nguyen Huu Tho said that setting short-term and medium-term goals is extremely important.

In particular, it is necessary to strengthen the removal of barriers when building guiding documents to implement laws issued in 2023 and 2024 in the direction of removing business conditions and procedures to closely follow market signals and the role of the market.

“Regarding resources for development, it is necessary to increase FDI capital mobilization, reduce waste in the public sector, reduce waste in the private sector, and invest in infrastructure development. Regarding development support policies, it is necessary to focus on supporting production and export, exploiting trade agreements well, reducing risks of maritime transport through military conflict zones, trade defense...," the Head of the Economic Analysis and Forecasting Department of CIEM recommended.