UOB warns ‘growth may slow in second half’

According to the General Statistics Office, GDP in the second quarter increased by 6.93% compared to the same period in 2023, continuing the 5.87% growth in the first quarter. In the first half of the year, Vietnam’s economy grew by 6.42%, far exceeding the 3.84% growth in the same period last year. This positive result creates a positive signal for the rest of the year, according to UOB Bank.

However, in the recently released Vietnam economic growth report for the second quarter, UOB’s research team said that the growth momentum of the economy may slow down in the second half of the year. This is due to external risks such as Conflicts in Ukraine and the Middle East could disrupt trade and energy markets.

In return, the recovery in semiconductor demand, stable growth in China and Southeast Asia, as well as the possibility of monetary policy easing by major central banks will be supportive factors for Vietnam’s outlook.

Commenting that growth may slow down in the last two quarters, UOB maintained its forecast for Vietnam’s growth this year at 6% – the lower limit of the government’s target of 6-6.5%. The 6% growth threshold this year is also the level that many international financial institutions, such as Standard Chartered Bank, have set for the Vietnamese economy.

With growth likely to ease in the second half, the Singapore bank forecasts the SBV will maintain its refinancing rate at its current level of 4.5%. “The recent depreciation of the VND against a stronger US dollar and rising inflation could make the SBV cautious in any changes to policy rates,” the report commented.

The average consumer price index (CPI) in the second quarter increased by 4.39% compared to the same period last year. This is the fifth quarter that the index has increased, approaching the threshold of 4.5%. The increase in the basic salary by 30% and the minimum wage for employees in enterprises by 6% from July 1 is believed to have an impact on inflation, according to UOB.

According to the bank, the European Central Bank’s interest rate cut in June and the US Federal Reserve’s possible start of monetary easing in the second half of the year could open up opportunities for the State Bank to follow the general trend. Instead of continuing to lower interest rates, the government is now focusing on non-interest rate measures to support the economy.