Super typhoon Yagi, the strongest to hit Vietnam in over three decades, caused brief economic disruptions, but HSBC has maintained its 6.5% GDP growth forecast for both 2024 and 2025.
The London-based bank said in its most recent report on Vietnam that the possible positive risks could outweigh the short-term economic disruptions caused by the typhoon, which made landfall in Vietnam on September 7 and destroyed a number of industrial hubs in the country’s north.
Vietnam’s economy expanded 6.9% year over year in Q2 2024, showing improvement and a pleasant surprise. The recovery in the external industry has started to expand out beyond consumer electronics.
After suffering greatly last year, the industrial sector has recovered well. The Manufacturing Purchasing Managers’ Index (PMI) has expanded for five months running, and the textile and footwear industries have seen a resurgence in activity in industrial production.
According to the bank’s researchers, “this has supported robust export growth at double digits, with structural forces, such as expanding market access for Vietnamese agricultural produce, also underway.”
In addition, the government has implemented policies to assist numerous local industries, which should gradually boost trust. Fuel-related environment tax breaks and value-added tax breaks for specific goods and services will expire at the end of 2024, but the real estate market will be supported by the amended Land Law, which goes into force in August.
Foreign investment in the industry has already increased as a result of the new Land Law, with recent FDI demonstrating wide-ranging gains.
The Asian Development Bank (ADB) maintained its 6% annual economic growth prediction for Vietnam last week. In the meantime, UOB, a Singaporean company, decreased its GDP growth prediction for Vietnam by 0.1 percentage points to 5.9% this year, accounting for Yagi’s damage.
In a similar vein, the typhoon is predicted by Japan’s Mitsubishi UFJ Financial Group (MUFG) to lower Vietnam’s GDP growth by 0.2–0.5 percentage points in 2024.
Le Minh Hoan, the minister of agriculture and rural development, stated last Saturday that the typhoon’s economic damage was assessed to be VND81.5 trillion ($3.31 billion), which is VND20 trillion more than his ministry had previously projected a week earlier.
Regarding inflation, HSBC reported that since negative base effects from energy have diminished, price trends are becoming more favorable in H2/2024. Certain influences on exchange rates will also be lessened by the anticipated Fed easing cycle.
The bank kept its 2024 inflation projections at 3.6%, which is much less than the 4.5% government target maximum. The bank maintained its 3% inflation estimate for 2025.