Vietnam’s economy recorded higher-than-expected growth of 7.40%YoY in 3Q2024, supported by exports and growth in the industrial sector

• Vietnam’s economy grew by 7.40%YoY in 3Q2024, higher than the 6.10% median estimate in a Bloomberg survey, and the 7.09% growth reported for 2Q2024, with the following key points:

• Growth was supported by exports and the expansion within the industrial sector while household consumption remained stable. Exports grew by 15.3% YoY in 3Q2024, accelerating from 13.9%YoY reported in 2Q2024, driven by the recovery of global demand for clothing, footwear, machinery and agricultural products, coupled with a slowdown in imports in 3Q2024, resulting in a wider trade surplus for Vietnam. In addition, the industrial production index accelerated to 10.5%YoY in 3Q2024, reflecting the acceleration of production to meet rising exports. As for household consumption, although retail sales grew at a slower pace in 3Q2024, inflation also slowed at a similar rate, resulting in relatively stable household consumption.
• Growth was dragged by a slowdown in public investment, which expanded  by a mere 0.3%YoY in 3Q2024, down from 3.2%YoY in 2Q2024. This was partly due to the anti-corruption movement in Vietnam that delayed project approvals and disbursements of public investment budgets.

• Vietnam's exports accelerated in 3Q2024, thanks to the recovery in global demand for clothing, footwear, machinery, and agricultural products, while electronics shipments saw slower growth. The slowdown in electronics exports was mainly due to two factors: (1) the US anti-dumping and anti-subsidy measures against Vietnam’s solar panel exports, which took effect in June 2024. However, Vietnam’s solar panel exports account for 2.0% of its total exports; and (2) the impact of Typhoon Yagi, which damaged the industrial sector, especially in Haiphong City and Quang Ninh Province, being electronics production bases in northern Vietnam.
• The Vietnamese economy is expected to slow down during the remainder of 2024, compared to the 6.75%YoY growth seen during the first nine months of 2024, as exports are likely to decelerate due to the high base effect in the fourth quarter of the previous year, coupled with the negative impact of Typhoon Yangi on the industrial sector in northern Vietnam. Affected areas include Haiphong City and Quang Ninh Province, as well as Hanoi, Bac Ninh, Bac Giang and Thai Nguyen Provinces, which together account for 55% of Vietnam’s total exports. The acceleration in exports in 3Q2024 was driven by the utilization of existing stocks and accelerating production in the industrial sector as a whole. For 2024, KResearch expects that the Vietnamese economy will grow at 6.60%, exceeding the prior estimate of 6.00%, buoyed by higher-than-expected 3Q2024 economic growth as the export growth forecast for 2024 has been revised upward to 12.60% from the 7.50% previously.  
• However, Vietnam’s economy still faces risks from unresolved real estate debt issues. The State Bank of Vietnam (SBV) has extended the debt relief and restructuring measures until December 31, 2024, reflecting concerns over defaults, while the NPL ratio continues to rise due to bad debts in the real estate sector. The problem of bad debts has made banks more cautious in lending, resulting in a tight credit environment.

Scan QR Code