Assessing that domestic economic activities are on the right track, exports and FDI continue to be positive, UOB forecasts that Vietnam's second quarter GDP will increase by 6%.

The forecast based on data until the end of May shows a positive outlook for Vietnam's growth trajectory, according to UOB Bank (Singapore).

In particular, the purchasing managers' index (PMI) from last month survey by S&P Global reached 50.3 and was the fourth increase in 5 months, showing that growth momentum is still positive. In the first five months of the year, the index of industrial production (IIP) increased by 6.8% over the same period in 2023, according to the General Statistics Office.

Along with that, exports gained double digit growth last month. Since the beginning of the year, FDI increased by 7.8% over the same period to USD 8.3 billion, the fastest in the 5-month period since 2018. This shows that investors continue to trust the political environment and competitiveness of Vietnam, UOB commented.

UOB Singapore assesses that domestic operations are on the right track, with total retail sales of goods and consumer service revenue continuing to improve, supported by the restaurant, accommodation and tourism services sectors.

In the first quarter, Vietnam's economy gained a growth rate of 5.66%. Along with its forecast of 6% for the second quarter, UOB kept its full-year forecast of 6% unchanged, compared to the official target of 6-6.5%.

According to this bank, the State Bank will keep the key policy interest rate unchanged for the remainder of the year, on the basis of balance between factors of stable domestic economic recovery, moderate inflation pressure and exchange rate situation.

In the second quarter, VND was still affected by the strength of the USD and traded at a record low of nearly VND 25,500 per US dollar. However, UOB believes that the dong can recover in the second half of the year, due to pressure from the falling USD ahead of the US Federal Reserve's expected interest rate cut in September.

In addition, VND may benefit from the recovery of the yuan in the next 6 months, as the Chinese economy is showing clearer signs of stabilization. Therefore, UOB forecasts the USD/VND exchange rate to be VND 25,200 in the third quarter and VND 25,000 in the fourth quarter.

Kylie Nguyen