The Asian Development Bank (ADB) has raised its forecast for Vietnam’s economic growth this year to 6.7%, citing buoyant exports and robust Foreign Direct Investment (FDI) despite the counter-tariffs imposed by the US. This new projection, announced on September 30, represents a 0.4 percentage point increasefrom the ADB’s figure two months prior.
Drivers of Optimism
Mr. Nguyen Ba Hung, an ADB economic expert, noted that the upgrade is based on several positive economic factors in the early months of the year. Both export activity and foreign investment have continued to climb, even with the influence of US tariffs. Mr. Hung highlighted Vietnam’s strong competitive advantage, observing that its tariff exposure is “not significantly worse than regional trade partners.” This optimistic outlook is shared by others: UOB Bank recently lifted its 2024 GDP forecast to 7.5%, and the World Bank (WB)projects full-year growth could reach 6.6%. The Vietnamese government has set a higher national target of 8.3-8.5% GDP growth for the year.
Trade and Investment Performance
Vietnam’s trade and investment figures through August have been strong. Exports surged by 14.8%, totaling around $306 billion. The US market saw the most substantial growth, up 26.4% year-on-year, while China and Japan also recorded increases. Concurrently, FDI disbursement—capital actually deployed—remained vigorous, growing 8.8% year-on-year to $15.4 billion. An ADB representative stressed this is the highest eight-month disbursement level in five years, demonstrating the confidence of existing foreign firms. However, a slight caution emerged as newly registered FDI capital fell by 8.1%, which the expert attributes to the “hesitation” of new investors due to global trade uncertainty.
Near-Term Challenges and Policy Focus
The ADB anticipates that growth will moderate in the remaining months of the year as exports start to absorb the impact of the new US counter-tariffs, effective since early August at a 20% rate on certain Vietnamese goods. The vigorous export growth in the first eight months was partly driven by a temporary surge as companies accelerated production to pre-empt the new tariffs. This slowdown is also reflected in the Purchasing Managers’ Index (PMI), which returned to the 50-point balance mark in August after July’s positive growth, suggesting a plateau in future orders.
Despite this near-term cooling, the ADB forecasts the economy will remain robust into 2025-2026, supported by expansionary fiscal and monetary policies. Mr. Shantanu Chakraborty, ADB Country Director for Vietnam, emphasized that better coordination between fiscal and monetary policy is key to avoiding undue pressure on monetary tools and safeguarding macro-financial stability. The bank also noted high credit growth—18%through August against a full-year target of 16%—which, while fueling growth, poses a potential macro risk if short-term credit is disproportionately directed toward non-productive assets like gold or stocks. The ADB’s long-term recommendations focus on comprehensive legal reforms to address climate change and enhance private sector competitiveness, alongside modernizing the tax system and promoting digital transformation. For 2026, the ADB projects economic growth at 6% with inflation at 3.8%.
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Source: Vietnam Insider