FDI prospects remain bright spot of Vietnamese economy

The HSBC report “Vietnam at a glance” outlined that greenfield FDI rose almost 60% year-on-year in the first quarter of the year, 65% of which is concentrated in the pillar manufacturing sector and the rest in the real estate.

Singapore has regained the crown as Vietnam’s largest FDI provider, with an impressive share of 50%. Greater China, that made up half of Vietnam’s FDI in 2023, came second with a share of 30%. The Republic of Korea and Japan, that traditionally are Vietnam’s two largest investors, only accounted for a share of 15% combined.

According to HSBC experts, while Vietnam is set to see better growth prospects in the Year of the Dragon (2024), its GDP in the first quarter of the year expanded by a slower-than-expected pace of 5.7% year-on-year.

Think tanks pointed out that this does not mean that the recovery story is derailed. Rather, Vietnam remains firmly on a rebound path, led by better trade prospects.

Indeed, high frequency indicators continue to point to sanguine trade outlook, largely thanks to an upturn in the electronics cycle. Not only has the short-term trade cycle turned, but the long-term positive FDI prospects also carry on. But to return to pre-pandemic growth, Vietnam’s growth requires a broadening out from its trade sector to domestic-oriented services.

HSBC economists kept their yearly growth forecast unchanged at 6.0% for 2024, but have tweaked their quarterly forecasts, accounting for a stronger pick-up in activities in the second half of the year.

With regard to inflation, they expect inflation to average around 3.9%, albeit elevated but still below the State Bank of Vietnam (SBV)’s inflation ceiling.

Source: VOV