Vietnam’s Economic Growth May Slow Down in Next Two Quarters Due to External Risks and High Base

UOB Bank predicts that Vietnam’s growth may slow down in the next two quarters due to a high base and external risks. According to the General Statistics Office, GDP in the second quarter increased by 6.93% compared to the same period in 2023, continuing the 5.87% growth in the first quarter. In the first half of the year, Vietnam’s economy grew by 6.42%, far exceeding the 3.84% growth in the same period last year, which creates a positive signal for the rest of the year.

However, UOB’s research team warns that external risks such as conflicts in Ukraine and the Middle East could disrupt trade and energy markets. On the other hand, factors such as recovery in semiconductor demand, stable growth in China and Southeast Asia, and possible monetary policy easing by major central banks are expected to be supportive factors for Vietnam’s outlook.

Despite this, UOB maintains its forecast for Vietnam’s growth this year at 6%, which is below the government’s target of 6-6.5%. With growth likely to ease in the second half, UOB forecasts that State Bank of Vietnam (SBV) will maintain its refinancing rate at its current level of 4.5%. However, recent depreciation of Vietnamese Dong against a stronger US dollar and rising inflation might make SBV cautious about making any changes to policy rates according to report.

Furthermore, average consumer price index (CPI) increased by 4.39% compared to second quarter last year which was fifth consecutive increase suggests that inflation is approaching threshold of 4