[HO CHI MINH CITY] Vietnam’s gross domestic product (GDP) grew 5.66 per cent year on year in the first quarter of 2024, with export growth returning to a double-digit rate.
This expansion was greater than those recorded in the same period in the previous four years, but slower than the 6.72 per cent rise in the preceding quarter.
In a report released on Friday (Mar 29), the country’s General Statistics Office (GSO) viewed the year-to-date economic and social performances of Vietnam as “positive” amid global economic turmoil.
The office cited the still-tight monetary policies of many major economies, the sluggish recovery of global commerce, consumption and investment, and supply-chain risks due to the ongoing Red Sea disruption.
The largest contributor to Vietnam’s growth in the first three months of 2024 was the services and manufacturing sectors, which grew 6.12 per cent and 6.98 per cent, respectively.
After a lower-than-expected expansion of 5.05 per cent last year, the legislature set a full-year growth target of 6 to 6.5 per cent for 2024, which the GSO described as a “big challenge”.
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The trade-reliant country’s exports in March surged by 14.2 per cent from a year ago to roughly US$34 billion. Imports also rose by 9.7 per cent from a year earlier to nearly US$31.1 billion.
As Vietnam’s leading export-revenue generators, overseas shipments of the smartphones and computers and electronics sectors continued to underscore upbeat global demand, climbing by 23.4 per cent and 16 per cent year on year in March to US$5.2 billion and US$5.7 billion, respectively.
Overall, exports and imports from January to March saw double-digit expansions of 17 per cent and 13.9 per cent, respectively, compared with the same period last year. This has resulted in a trade surplus of around US$8.1 billion in the first quarter.
Industrial production this month jumped 4.1 per cent year on year, cutting the Q1 rise to 5.7 per cent, which was led by manufacturing (5.9 per cent) and electricity and gas (12.1 per cent).
Analysts expect production to catch up with export growth in the coming months, with rising numbers of new orders and depleting inventories. Increased factory activities will also likely boost employment and stimulate consumption more firmly in the second half of the year.
In its survey for the February purchasing managers’ index, S&P Global reported that Vietnamese manufacturers responded to the increase in new orders by expanding their staffing levels for the first time in four months, and to the greatest degree in a year.
Retail sales returned to normal in March after the Tet new year holiday the month before, the GSO noted, with year-on-year expansion at 9.2 per cent, higher than last month’s rate of 8.5 per cent. Overall, retail sales of goods and services rose 8.2 per cent from a year ago.
Inflation seems not to pose any concerns to household spending and remains within the State Bank of Vietnam’s cap at 4.5 per cent for the year.
Consumer prices dropped slightly in March, down 0.23 per cent from the preceding month and up 3.97 per cent on a 12-month basis.
Core inflation – which strips out the costs of food, fuel, healthcare and education services – stood at 2.76 per cent year on year, slower than the 2.96 per cent increase last month.
From January to March, the average consumer price index was up 3.77 per cent from the year-ago period, while average core inflation was 2.81 per cent.
Short-lived pressure
Even though the improved exports and consumption prospects tend to buoy investment and lending demand, relatively high borrowing costs and limited access to bank loans remain hurdles for domestic companies. As at Mar 25, the credit growth of the banking system increased by a modest 0.26 per cent against the end of 2023.
State Bank of Vietnam deputy governor Dao Minh Tu recently said that the decline in commercial lending interest rates for new loans has not kept pace with the decrease in deposit rates.
The central bank aims for credit growth of about 15 per cent this year, and plans to keep policy interest rates unchanged, at least in the first half of 2024.
Vietnam’s dong is trading near its lowest level since November 2022 against the US dollar, resulting in a year-to-date depreciation of 2.18 per cent.
Trade recovery will likely contribute to a strain on the exchange rate between the greenback and the dong, which is already under pressure from the US Federal Reserve’s intention to keep interest rates higher for longer, said analysts at MB Securities.
However, they expected the current exchange-rate pressure to be short-lived, as the dong is likely to strengthen due to a favourable trade surplus, increasing disbursement of foreign direct investment (FDI) capital, steady remittances, and a promising rebound in international tourism.
As at Mar 20, registered FDI grew by 13.4 per cent from a year ago to US$6.17 billion. The disbursed amount for the first three months rose to the highest level in the past five years to US$4.63 billion, up 7.1 per cent year on year.
Vietnam recorded 4.64 million foreign visitor arrivals in the first three months of the year, up 72 per cent from a year ago and higher than the 2019 pre-pandemic level.
