Vietnam’s economy expands 5.33% in Q3, but likely to miss full-year growth target
Vietnam
Jamille Tran
[HO CHI MINH CITY] Vietnam’s economy grew 5.33 per cent year on year in the third quarter, an improvement from the 4.05 per cent expansion in the previous three months but much slower than the low-base growth of 13.7 per cent in the same quarter in 2022.
According to estimates released by the General Statistics Office (GSO) on Friday (Sep 29), the economy continued to be buoyed by the ongoing recovery in the tourism sector, a brighter manufacturing outlook, and improved exports.
The latest figures bring the growth for the January-September period to 4.42 per cent, the agency noted in a report.
National Assembly chairman Vuong Dinh Huy said on Sep 19 that Vietnam will likely struggle to meet the official full-year growth target of 6.5 per cent, which is already down from last year’s 8.02 per cent.
Earlier this week, economists from Standard Chartered Bank projected Vietnam’s 2023 GDP to grow by 5.4 per cent.
The Asian Development Bank recently lowered its forecast to 5.8 per cent, from 6.5 per cent predicted in April, mainly due to weak external demand. The International Monetary Fund on Wednesday said it expects growth to come in at 4.7 per cent. Even at those numbers, Vietnam would still be the fastest growing country in South-east Asia this year.
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“Vietnam (will) only reach a year-end economic growth of between 4.5 per cent and 4.7 per cent, much lower than the government’s set target,” Tran Thi Ha My, the chief economist of Rong Viet Stocks Company, was quoted as telling AFP.
“Growth for the fourth quarter is expected to be at around 6 per cent... largely thanks to improved industrial production and exports.”
Rebound in exports
SEE ALSO
Exports in September grew by 4.6 per cent from a year ago, ending a six-month decline. This also narrowed the trade-reliant country’s exports slump in the first nine months to 8.2 per cent, from 12 per cent in the first half of 2023.
During the January-September period, imports contracted by 13.8 per cent from a year earlier to US$238 billion, while exports totalled US$259.7 billion.
Industrial production in September jumped 5.1 per cent year on year, returning to growth at 0.3 per cent over the first nine months.
The S&P Global’s purchasing managers’ survey for August also showed improvements in the sector’s new orders, output, exports and purchasing, reflecting some signs of demand recovery and fueling business confidence in the outlook for production in the months ahead.
S&P in turn calculated the index at 50.5 in August, which was marginally above the 50.0 “no-change” mark for the first time in six months.
“Improvements were generally still quite muted, however, as demand conditions remained fragile. It’s probably too early to say that the sector is in full recovery mode,” said Andrew Harker, the economics director at S&P Global Market Intelligence.
The largest contributor to Vietnam’s Q3 economic growth was the services sector, which increased 6.24 per cent thanks to the high growth momentum seen in the commercial and tourism sectors, GSO noted.
In the first nine months, foreign visitor arrivals were 4.7 times that of the year-ago period and crossed the full-year target of eight million, led by tourists from China, South Korea, Japan and Russia.
Retail sales of goods and services remained resilient in September with year-on-year expansion at 7.5 per cent. Overall, retail sales through September rose 9.7 per cent from a year ago, much slower than the 21 per cent growth recorded in the same period last year.
Less need for monetary policy support
In September, year-on-year inflation quickened to a six-month high of 3.66 per cent, up from the previous month’s 2.96 per cent.
Core inflation – which strips out the costs of food, fuel, healthcare and education services – came in at 3.8 per cent, from 4.02 per cent in August.
From January to September, the average consumer price index was up 3.16 per cent from the year-ago period, while average core inflation was 4.49 per cent. The government aims to cap full-year inflation at 4.5 per cent.
In the past five months, Vietnam’s inflation has picked up in month-on-month terms, and analysts expect continued pressure from rising global food and energy prices.
“While easing price pressures should allow policymakers to focus on growth, renewed concerns about an inflation rebound in the second half of the year could deter such a move,” said Tim Leelahaphan, economist for Thailand and Vietnam at Standard Chartered, in a report.
“With the economic recovery starting to gain momentum, there should be less need for monetary policy support.”
The State Bank of Vietnam (SBV) has slashed key policy rates four times, all in the first half of this year, to bolster the economy.
The central bank has issued up to 90 trillion dong (S$5.04 billion) of 28-day bills to absorb excess liquidity in the banking system through open market operations, which analysts see as an attempt to stabilise the exchange rate. The dong has fallen by about 3 per cent against the US dollar so far this year.
“The higher the exchange rate pressure is, the less room there is for SBV to continue reducing policy rates,” said Dinh Quang Hinh, the head of macro and market strategy at VNDIRECT Securities Corporation.
“We believe that a moderate depreciation of the dong compared to the US dollar will also help boost exports and be less likely to cause massive foreign investment capital outflows from Vietnam.”
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