Singapore-based bank UOB predicts that Vietnam's economy in the first quarter will show positive signs compared to the same period last year, with a growth rate of 5.5%, while the Vietnamese dong (VND) still has the potential for a slight recovery.

A worker at the JK Vietnam Company in Chuong My District, Hanoi. Photo: Pham Hung/The Hanoi times

This forecast is made in the recently released UOB Economic Growth Forecast for the first quarter of 2024. The outlook for the beginning of this year is therefore expected to be more positive than in the first quarter 2023 when GDP grew by 3.32%, according to data from the Ministry of Planning and Investment.

The Singaporean bank said that while external conflict risks continue to weigh on the global economy, Vietnam's prospects are strengthened by the semiconductor industry's recovery, stable growth in China and the region, as well as the favorable shift in the supply chain for Vietnam and Southeast Asia.

 For instance, statistics from the General Statistics Office show that foreign direct investment (FDI) registered in Vietnam in the first two months of the year reached nearly US$4.29 billion, a 38.6% increase compared to the same period in 2023. Total import and export turnover increased by 18.6%, with exports alone reaching nearly US$60 billion, a 19.2% increase.

On the domestic front, consumer services activity was buoyant in the first two months of the year,  significantly higher than in the same period last year. The industrial production index is estimated to have increased by 5.7%, with the processing and manufacturing sector up by 5.9%. The Purchasing Managers' Index (PMI) for both January and February was above  50, compared with an average of 49.3 in the same period of 2023, indicating an expanding production.

According to UOB, there are positive signs of recovery in the manufacturing and foreign trade sectors, especially in the second half of 2024. This recovery phase in the semiconductor industry is expected to be more robust, and global central banks are starting to adopt more appropriate interest rate policies.

Therefore, the bank's experts maintain their growth forecast for Vietnam in 2024 at 6%, within the official target range of 6-6.5%. Inflationary pressures continue to rise, with the full-year Consumer Price Index (CPI) expected to reach 3.8% this year, up from 3.25% last year. The State Bank of Vietnam may continue to keep policy rates stable this year.

As for the currency market, after the USD/VND exchange rate reached a new high of VND24,700 at the end of February, coupled with the significant strengthening of the USD against Asian currencies, UOB believes that the VND still has the potential for a slight recovery.

"Despite the short-term weakness of the VND, expectations of stronger GDP growth in Vietnam and the recovery momentum in production and foreign trade are positive factors that can help stabilize the VND," the bank concluded.