The Singaporean-based United Overseas Bank (UOB)'s Global Economics & Market Research Unit on July 2 released its report on Vietnamese economic growth in the second quarter of 2024, maintaining its growth forecast at 6.0% for 2024 despite a higher-than-expected result in the second quarter.
According to UOB, experts cited data from the General Statistics Office showing that Vietnam’s real GDP grew by 6.93% year-on-year in Q2, continuing the momentum from the 5.87% increase in Q1 and previous quarters.
Overall, the economy expanded by 6.42% in the first half, significantly outpacing the 3.84% growth logged in the same period of last year.
The manufacturing and services sectors continued to drive most business activities, with respective growth of 10% and 7.1%. These sector contributed 31% and 44%, respectively, to the Q2 economic expansion.
According to UOB, the recovery of domestic spending pressured consumer prices. This caused Vietnam's headline CPI in the second quarter to increase for the fifth consecutive quarter to 4.39% over the same period last year. This is close to the State Bank of Vietnam’s upper threshold of 4.50%.
However, the UOB held that in the future, inflation could be impacted by the plan to increase the minimum wage by 6% from July 2024, a slightly larger increase than the 5.88% in July 2022. Vietnam increased its minimum wage by 7.3%, 6.5% and 5.3% in 2017, 2018 and 2019, respectively.
The bank asserted that strong growth will continue to be seen in the second quarter of 2024, driven by consumer demand as well as the recovery of semiconductor industry demand since mid-2023.
Despite the Russia-Ukraine conflict and ongoing Red Sea shipping disruptions, a double-digit increase in exports was seen for four consecutive months at 10.5%. Imports increased 13.1% compared to the same period last year. In the first half of 2024, exports and imports rose 14.0% and 16.6%, respectively, over the same period. This led to a trade surplus of 11.3 billion USD, nearly equal to the surplus of 12.1 billion USD achieved in the whole year of 2022.
The UOB report is positive on foreign investment and Vietnam's long-term prospects in the coming years. Foreign direct investment (FDI) inflows in the Jan-June period increased 13.1% over the same period last year to 15.2 billion USD, following a 13.4% increase in the first quarter of 2024.
In addition, FDI disbursement in Vietnam from the beginning of the year to June reached 10.8 billion USD, doubling the figure of 4.6 billion USD recorded in the first quarter of 2024. However, actual FDI inflows into Vietnam reached a record high of 23.2 billion USD in 2023, surpassing the previous record of 22.4 billion USD in 2022, it noted.
The UOB report pointed out that steady growth in China and the Southeast Asia region as well as the possibility of monetary policy easing by major central banks support Vietnam's economic outlook.
Overall, the UOB maintained its growth forecast for Vietnam at 6.0% for 2024, compared to the government's target range of 6.0-6.5%.
