HSBC raises Vietnam growth forecast to 7%

After third-quarter GDP exceeded forecasts despite the impact of typhoon Yagi , HSBC raised its growth forecast for Vietnam from 6.5% to 7%.

HSBC’s latest update revised up Vietnam’s full-year growth forecast after the General Statistics Office reported that GDP grew 7.4% in the third quarter, despite the impact of Typhoon Yagi. The bank said the result was “stronger than expected” as it exceeded its forecast of 6.2%.

Thus, HSBC's forecast is currently the highest among international organizations and is equivalent to Vietnam's target of 6.5-7%. Previously, many financial institutions continued to maintain or even raise Vietnam's growth forecast after Typhoon Yagi.

Specifically, ADB kept its forecast at 6%. The World Bank (WB) expected a growth rate of 6.1%. Meanwhile, the International Monetary Fund (IMF) and UOB both raised their forecasts to new levels of 6.1% and 6.4%, respectively.

According to HSBC, after a difficult 2023 and the first quarter of 2024, Vietnam has returned to being the growth star of Southeast Asia. The results are led by manufacturing growth, exports continue to recover and spread to more sectors, from electronics to textiles and footwear.

While Typhoon Yagi is likely to have contributed to a decline in September export growth, the impact is expected to be short-lived. Manufacturing sentiment was recorded as positive for the future outlook as underlying demand remains strong.

Vietnam continues to attract foreign capital flows as fundamentals remain positive. Although newly registered FDI growth declined in the third quarter, sectors such as real estate and energy saw increased investment.

In the future, capital flows into manufacturing are likely to remain stable during the visit of General Secretary and President To Lam to the US, according to HSBC. Along with that, continuous efforts to strengthen relations with international partners will also create favorable conditions to attract more investment, such as Vietnam and France recently upgraded their relationship to a comprehensive strategic partnership.

In terms of inflation, price pressures are no longer as intense as before, although we need to monitor the lasting impact of Typhoon Yagi. With falling global energy prices and the global monetary policy cycle reversing, HSBC forecasts full-year inflation at 3.6%, below the State Bank of Vietnam’s target ceiling of 4.5%. At the same time, the policy interest rate is likely to remain at the current level of 4.5%.

Source