HSBC raises Vietnam’s GDP growth forecast to 6.5% in 2024

Given Vietnam’s better-than-expected economic performance in the first half of the year, HSBC has raised its GDP growth forecast for the country from 6% to 6.5%.

Hanoi from above. Photo: Thanh Hai/The Hanoi Times

If achieved, Vietnam could become the fastest-growing economy in Southeast Asia in 2024, a position held by Malaysia and the Philippines in 2022 and 2023, HSBC noted in its latest report.

Following strong economic growth in Q2 and the first half of the year, the Government has revised its target to 7% growth this year, higher than the 6-6.5% goal set by the National Assembly. Currently, many international financial organizations, including the IMF, ADB, UOB, and Standard Chartered, forecast Vietnam's growth at 6% this year. Meanwhile, the World Bank offers a more cautious projection of 5.5%. It noted that HSBC said its decision to raise its forecast was based on signs of a broad-based economic recovery in the first half of the year.

Vietnam’s Q2 GDP growth surged to 6.9%, the highest in two years and well above market expectations of 6%.

The most surprising sector was manufacturing, which grew by 10% compared to the same period in 2023, leading to a 15% increase in Q2 exports. Producer sentiment also improved markedly, with the Purchasing Managers' Index (PMI) in June rising sharply to 54.7, the highest in two years.

According to HSBC, the encouraging signs of rising employment and new export orders in recent months are a positive indication for Vietnam's manufacturing sector. Additionally, retail revenue growth has not yet returned to pre-pandemic levels, but tourism-related services continue to show positive momentum. The National Assembly recently agreed to extend the VAT reduction from 10% to 8% until the end of the year and reduce some fees for certain sectors.

This move is expected to provide some support to the domestic economy. Additionally, inflation is likely to have peaked in June and is expected to decline over the remainder of the year, provided there are no significant disruptions to the pork supply due to disease.

However, HSBC advises close monitoring of the stability of the international trade recovery and its potential spillover effects on domestic economic sectors. The bank also maintains its view that the State Bank of Vietnam will keep the policy interest rate steady at 4.5% this year despite ongoing concerns about foreign exchange rate stability.