HSBC: Vietnam is a ‘growth star’ in Southeast Asia

The comments are stated in the assessment of the 2024 macroeconomic situation released by HSBC Vietnam on the morning of December 20. According to a group of experts from this bank, after a difficult start in the first quarter, the economic picture is mostly more positive over the months. Despite Typhoon Yagi, recovery accelerated in the second half of the year, led by production.

The 11-month index of industrial production (IIP) increased by 8.4% over the same period in 2023, supporting exports to increase at a double-digit level, reaching 14.4%. What is encouraging is that trade was initially positive in the electronics industry and then gradually expanded, such as textile, garment and footwear exports increased by 16.7% in the third quarter. “The manufacturing industry has escaped last year’s difficulties strongly,” the group of experts said.

Attracting foreign capital flows is still basically positive. Implemented FDI capital in 11 months is estimated at 21.68 billion USD, up 7.1% over the same period last year. This is the third consecutive year that Vietnam has achieved FDI disbursement of over 20 billion USD.

After GDP unexpectedly increased by 6.9% in the second quarter and 7.4% in the third quarter, HSBC believes that Vietnam’s 2024 growth will reach 7%, the highest level among the 6 largest economies in the East. South Asia (along with Indonesia, Malaysia, Philippines, Singapore and Thailand). Thus, this year it is likely that Vietnam will “return as a growth star”, after the Philippines led the region last year.

Next year, this bank forecasts that Vietnam’s GDP will increase by 6.5%, continuing to maintain the highest level in the region. Meanwhile, the growth target for 2025 assigned by the National Assembly to the Government is 6.5-7%, striving for 7-7.5%. According to the expert group, there is still a basis to set this expectation in the context of favorable production and export.

However, HSBC warns of some risks for next year. How much commodity demand improves will be key to determining the strength of the recovery, as Western markets account for nearly half of Vietnam’s exports. Therefore, it is necessary to closely monitor the trajectory and spending speed of consumers in these markets.

It is too early to assess the specific impact of the Trump administration’s policies. However, any policy will have an impact on ASEAN, including Vietnam, through different forms, according to the expert group.

With Mr. Trump’s intention to impose universal tariffs of 10-20% on all goods imported into the US, exporters of some domestic products may have difficulty finding alternative markets if tariffs are implemented. .

For example, the export structure of Vietnam’s garments and footwear to the US accounts for more than 40% and 33%, respectively. Europe is the second largest market for these products, but it is difficult to fully absorb them in the short term. However, Vietnam can hedge potential tariff risks from the US in the medium to long term through owning many free trade agreements (FTAs).

In addition, the exchange rate that may recur is a matter of concern. Vietnam was labeled a “currency manipulator” by the US Treasury Department in December 2020, before being removed from the list in April 2021. However, Vietnam is still on the US Treasury Department’s most recent monitoring list, meaning trade data needs to be closely monitored.

The movement of the USD is also a factor to consider for the upcoming exchange rate trend. With an uneven recovery and a high growth target for next year, HSBC expects the State Bank to maintain a flexible monetary policy, keeping the operating interest rate unchanged at 4.5% until the end of 2025.