AsemconnectVietnam - The impact of Typhoon Yagi may be felt more clearly in late Q3 and early Q4 2024, slowing down Vietnam's economic growth compared to UOB Vietnam's previous forecast.

UOB Vietnam has just released a report on the economic situation in Q3 with many updated forecasts on growth after the impacts of Typhoon Yagi.
Accordingly, before Typhoon Yagi, Vietnam's data in the first 8 months of this year still showed strong growth momentum. Vietnam's Purchasing Managers' Index (PMI) has outperformed its ASEAN neighbors since June of 2024. Manufacturing output recorded four consecutive months of double-digit growth (year-on-year) from May to August.
Exports recorded double-digit growth (year-on-year) in seven of the first eight months of the year, with a trade surplus of US$18.5 billion in the year to August, on track to surpass or at least match the record trade surplus of US$28.4 billion in 2023. Year-to-date, retail sales have maintained an average monthly growth rate of 8.8% year-on-year, despite a high base in 2023.
UOB expects the impact of Typhoon Yagi to be felt more clearly in the northern regions in late 3Q2024 and early 4Q2024. The impact will be felt through lower output and damaged facilities across a range of sectors including manufacturing, agriculture and services. However, beyond these temporary disruptions, the long-term fundamentals remain solid.
While Vietnam grew at an impressive 6.93% in 2Q24, its fastest pace in nearly two years, UOB believes that this strong growth momentum is unlikely to continue in 2H24. Taking into account the impact of Typhoon Yagi, reconstruction efforts and a higher base in 2H23, UOB is revising down its growth forecast for Vietnam.
For 3Q24, UOB expects growth to slow to 5.7% (down from 6%) and for 4Q24 to 5.2% (down from 5.4%). As a result, the full-year growth forecast is lowered to 5.9% (down by 0.1% percentage points from the previous forecast of 6%). This is still a positive recovery from the 5% growth in 2023. The GDP growth forecast for 2025 is revised up by 0.2% percentage points to 6.6%, reflecting an expected increase to offset earlier declines.
On interest rate policy, despite the impact of the recent Typhoon Yagi and the significant recovery of the VND since July, UOB experts still expect the SBV to maintain its key policy rate for the rest of 2024, while keeping an eye on inflation risks.
Year-to-date, headline CPI increased by 4% year-on-year in August, just below the target of 4.5%. Price pressures are likely to increase following disruptions to agricultural output, as food accounts for 34% of the CPI weight. “The SBV is likely to adopt a more targeted support approach to support affected individuals and businesses in their region, rather than deploying a broad support tool such as a rate cut across the country,” the UOB report said.
Accordingly, the SBV is expected to maintain the refinancing rate at its current level of 4.5% while focusing on boosting credit growth and other support measures. However, the US Federal Reserve’s announcement of a 50 basis point rate cut at its September meeting may increase the likelihood (and pressure) for the SBV to consider a similar policy easing.
CK
Source: VITIC/haiquanonline.com.vn