Vietnam’s Economic Outlook: Treading Carefully in the Second Half Amid Growing External Risks

According to UOB Bank, Vietnam’s economic growth may slow down in the next two quarters due to a high base and existing external risks. The country’s GDP increased by 6.93% in the second quarter compared to the same period in 2023, following a 5.87% growth in the first quarter. The economy grew by 6.42% in the first half of the year, far exceeding last year’s 3.84% growth.

While this positive performance is a good sign for the year, UOB’s research team warns that growth momentum may slow down in the second half. External risks such as conflicts in Ukraine and the Middle East could disrupt trade and energy markets. On the other hand, factors like semiconductor demand recovery, stable growth in China and Southeast Asia, and potential monetary easing by major central banks could support Vietnam’s outlook.

UOB maintains its forecast for Vietnam’s growth at 6% for the year, which is the lower limit of the government’s target range of 6-6.5%. The bank anticipates that the State Bank of Vietnam (SBV) will maintain its refinancing rate at 4.5% given the recent depreciation of the Vietnamese Dong against the US dollar and rising inflation. The CPI increased by 4.39% in the second quarter compared to the same period last year, nearing the 4.5% threshold.

With opportunities for monetary policy easing coming from external sources such as interest rate cuts from European Central Bank and possible easing from US Federal Reserve in second half of year , SBV may follow suit to maintain refinancing rate at 4.5%, focusing on non-interest rate measures to support economic growth while expected slowdown.

In conclusion, while Vietnam has had a strong first half with positive GDP increase, there are challenges ahead due to external factors like conflicts and rising inflation . However with potential monetary easing from major central banks and focus on non-interest rate measures , government is optimistic about maintaining its target range of 6-6