New forecast on Vietnam's economic growth after storm No. 3

TPO - For the third quarter, Singapore's UOB Bank forecasts Vietnam's economic growth to slow to 5.7%, down from its previous forecast of 6.0%; and for the fourth quarter, it forecasts growth of 5.2%, down from 5.4%. UOB's forecast for Vietnam's growth this year has been lowered to 5.9%, down 0.1% from its previous forecast of 6%.

How is it affected?

gdp.tpo' title="gdp">gdp.tpo' title="gdp">gdp-con-thap-post1609689.tpo" target="_blank">UOB Bank has just released a report on the economic situation in the third quarter. According to UOB, storm YAGI (storm No. 3) caused damage worth 40,000 billion VND in the northern localities and is estimated to reduce 0.15% of Vietnam's GDP in 2024.

Before Typhoon YAGI, Vietnam’s data through August was still showing strong growth momentum, with exports recording double-digit year-on-year increases, with a trade surplus of $18.5 billion.

Year-to-date through August, retail sales maintained an average monthly growth rate of 8.8% y-o-y, despite a high base in 2023. Realised FDI inflows in the first eight months of the year increased 8% to US$14.2 billion. However, in terms of growth prospects for this year, UOB said that the impact of Typhoon No. 3 will be more clearly felt in the northern regions of the country in late Q3 and early Q4.

“The impact will be felt through lower output and damaged facilities across sectors such as manufacturing, agriculture and services. However, beyond these temporary disruptions, long-term fundamentals remain solid,” the UOB report said.

Before storm No. 3, Vietnam's data until August still showed strong growth momentum.

Experts from UOB Bank commented that although Vietnam had outstanding growth of 6.93% in the second quarter of this year, this strong growth momentum is unlikely to continue in the second half of the year.

Taking into account the impact of Typhoon No. 3, reconstruction efforts and a higher base in the second half of 2023, UOB is revising down its growth forecast for Vietnam.

Specifically, for the third quarter, Singapore's UOB Bank forecasts Vietnam's economic growth to slow to 5.7%, down from its previous forecast of 6.0%; and for the fourth quarter, it forecasts growth of 5.2%, down from 5.4%. UOB's forecast for Vietnam's full-year growth this year has been lowered to 5.9%, down 0.1% from its previous forecast of 6%.

“This is still a positive recovery from the 5% growth in 2023. The GDP growth forecast for 2025 is revised up by 0.2% to 6.6%, reflecting the expected increase to offset the earlier declines,” said UOB experts.

Difficult to reduce interest rates

According to UOB, despite the impact of the recent storm No. 3 and the significant recovery of the VND exchange rate since July, UOB experts still expect the State Bank to maintain key policy interest rates for the rest of the year, while paying attention to inflation risks.

The headline CPI rose 4% year-on-year in August, just short of the 4.5% target. Price pressures are likely to intensify following disruptions in agricultural output, as food accounts for 34% of the CPI.

UOB's forecast of exchange rates and economic indicators in Vietnam until Q3/2025.

The State Bank is likely to adopt a more targeted support approach to assist affected individuals and businesses in their own areas, rather than deploying a broad support tool across the country such as interest rate cuts.

Therefore, UOB expects the State Bank to maintain the refinancing rate at the current level of 4.50% while focusing on boosting credit growth and other support measures.

However, the US Federal Reserve's announcement of a 50 basis point interest rate cut at its September meeting could increase the likelihood and pressure on the State Bank to consider a similar policy easing.

Also according to UOB, in line with regional currencies, the VND recorded its biggest quarterly gain since 1993, recovering 3.2% to VND24,630/USD. External pressure from the strength of the USD is starting to ease as the Fed begins its easing cycle as expected, while internal factors point to further stability of the VND.

UOB forecasts the updated USD/VND exchange rate to be 24,500 in the fourth quarter of this year, 24,300 in the first quarter of 2025, 24,100 in the second quarter of 2025 and 23,900 in the third quarter of 2025.

Duy Quang

Source: https://tienphong.vn/du-bao-moi-ve-tang-truong-kinh-te-viet-nam-hau-bao-so-3-post1676202.tpo