From a challenging 2023 and Q1, Vietnam is clearly back as ASEAN’s growth star, the bank said in its update "Vietnam at a glance: In its own league" released on October 11.
Q3 growth came in at 7.4% year-on-year, beating HSBC and consensus expectations of 6.2% and 6.1%, respectively, it said.
The outperformance continued to be led by manufacturing, which grew 11.4% year-on-year, according to HSBC. This was corroborated by healthy trade data, with exports rising 15.3% year-on-year in Q3.
The bank noted that the trade recovery that was initially centred around electronics is showing signs of broadening out, with textiles and footwear exports rising 16.7% year-on-year.
HSBC experts held that while Typhoon Yagi likely played a role in weighing on export growth in September, the impact is expected to be short-lived.
Indeed, the manufacturing PMI fell sharply into the contractionary territory in September, indicating a deterioration from the previous month as businesses assessed damages to production.
Although there have been some signs of bumps in global trade, leading indicators such as manufacturing industrial production and imports continued to post double-digit year-on-year growth, supporting the view that the manufacturing sector will remain firm.
In contrast, growth in the agro-forestry-fishery sector moderated as a reflection of Typhoon Yagi’s larger impact on the sector. The recovery in domestic-oriented services continued to remain relatively muted, with the spillover from a rebounding external sector not being as pronounced. Retail sales growth has shown little signs of accelerating, while monthly international tourist arrivals have stalled amidst rising regional competition to draw travellers.
However, there were encouraging signs such as financial services and real estate showing an acceleration in Q3. The revised Land Law effective August will buttress improving sentiment seen in the real estate sector, while ongoing government measures such as tax cuts should also support the domestic retail sector with time, said the bank.
On FDI, Vietnam continued to attract foreign inflows as fundamental prospects remain positive. Although growth in newly registered FDI moderated in Q3/24, sectors beyond manufacturing such as real estate and energy saw increases in investment.
According to HSBC, capital flows into manufacturing are likely to remain resilient in the future, as Party General Secretary and President To Lam's visit to the US has attracted interest from various companies such as Meta.
It went on to say that continued efforts to deepen ties with international partners will also act as a tailwind for further investment inflows, with Vietnam recently upgrading relations with France to a Comprehensive strategic partnership.
Inflation has shown a notable decline in recent months, thanks to the base effects and favourable price movements related to commodity prices and exchange rate fluctuations. Given falling global energy prices and a reversal in the global monetary policy cycle, inflation is expected to remain below the State Bank of Vietnam’s target ceiling of 4.5%.
HSBC keeps its 2025 GDP growth forecast unchanged at 6.5%. With the recovery still uneven, experts from the bank expect the State Bank of Vietnam to maintain its accommodative stance and the policy interest rate at 4.5% until the end of 2025.
