The report outlines that growth is expected to stay moderate at 7.5% year on year in the first half of 2025 and at 6.1% in the second half of the year. The growth will primarily be driven by increased business activity coupled with sustained foreign investment.
The national economy expanded 7.09%, well above the Government’s 6.5% target, supported by accommodative monetary policy and strong retail sales. However, recent data shows a moderation, particularly in the property sector, which continues to struggle despite early signs of a growth recovery.
Inflation rose to 3.6% y/y in January, up from 2.9%, marking the sixth straight month of below 4%. Increases in prices of transportation and food during the New Year and Lunar New Year holidays can be seen as the main factors which drove the pace of inflation in January, according to the General Statistics Office (GSO).
Iinflationary pressures could intensify in the year ahead, driven by rising costs in health care, housing, construction materials, and food. The central bank may face challenges if inflation picks up in the second quarter of the year, which in turn could complicate economic recovery efforts.
Standard Chartered’s economists point out that CPI inflation is expected to continue to rise on an annual basis over the coming years.
Other key January macro indicators highlighted a moderation in domestic and external data, although electronics exports continued to improve. A large trade surplus with the US could attract increased scrutiny under the new US administration.
While the external position stays solid, certain risks persist, as for example seen in the monthly trade surplus that has narrowed recently. In addition, proposed rule changes may disqualify minimally processed imported goods from carrying the “Made in Vietnam” label, which in turn could affect supply chains.
Moreover, the relocation of global production to Vietnam may also raise concerns about overcapacity and pricing pressures.
Vietnam managed its VND currency, limiting short-term foreign exchange (FX) volatility. Despite a historical fiscal deficit averaging ~2% of GDP over the past two decades, the fundamentals of the Vietnamese economy are strong. The central bank may therefore need to accumulate FX reserves in a bid to prevent excessive VND appreciation.
Experts emphasise that tourism is anticipated to be a key driver of growth, supported by increased international arrivals, especially the return of Chinese tourists.
Meanwhile, credit growth is forecast to be at 16.0% this year, exceeding the 15.1% rate in 2024. Lower US interest rates may help to reduce capital outflows, but the country’s low import cover remains a challenge.
“The government’s focus for stronger economic growth may support low interest rates in the near term. However, we anticipate rate normalisation in the second quarter of the year, with the State Bank of Vietnam (SBV) expected to hike rates by 50bps in the second quarter,” said Tim Leelahaphan, senior economist for Thailand and Vietnam of Standard Chartered Bank.
“With inflation dynamics, Fed policies, and the performance of the VND playing a key role, the SBV’s monetary policy decisions will be crucial in maintaining economic stability and growth in 2025. Ensuring sustainable growth will require diversifying the economy and increasing preparedness for natural disasters,” he added.
