HSBC has raised its forecast for Vietnam's GDP growth this year to 6.5% from 6%. (Illustrative image)

The update comes from the bank's global research department in its recent "Vietnam at a Glance" report. Yun Liu, ASEAN economist at HSBC Global Research, noted that Vietnam's GDP grew 6.9% year-on-year in the second quarter, nearly the highest level in two years and significantly surpassing HSBC’s expectation of 6%. The slight rise in the first quarter brought the first half's growth to 6.4% compared to the same period last year.

HSBC's analysis highlighted that the manufacturing sector was the most surprising, growing by 10% year-on-year. This was reflected in strong export growth in the second quarter, which reached 15% year-on-year. While the recovery was mainly led by the electronics sector, other industries also began to show rebound signs.

Moreover, the business sentiment among the manufacturers has visibly improved. The Purchasing Managers' Index (PMI) for June surged to 54.7, the highest in two years. The outlook for long-term foreign direct investment (FDI) remains bright. Despite a fall from the peak in 2017, new FDI continues to flow into Vietnam, with capital from not only China and the Republic of Korea but also ASEAN countries, particularly Singapore.

In addition to trade, tourism-related services have maintained a positive trajectory. In the first half alone, Vietnam attracted over 8.8 million visitors, surpassing the total logged in 2019. However, as of mid-2024, retail revenue growth had yet to fully recover to pre-pandemic levels.

The Vietnamese government continues with policies in support of the domestic economy, with the National Assembly recently agreeing to extend the VAT reduction from 10% to 8% until the end of this year and reduce certain fees for specific industries. These measures are expected to support the economy in the coming period.

HSBC's upward revision of the GDP growth forecast to 6.5% suggests that Vietnam could become the fastest-growing economy in ASEAN in 2024, a position it temporarily ceded to Malaysia and the Philippines in 2022 and 2023, according to Yun Liu.