United Overseas Bank (UOB) is optimistic but cautious on Vietnam's economic outlook, with a GDP growth forecast of 7.1% for the first quarter.

Industrial production in Thach That District, Hanoi. Photo: Le Thiet/The Hanoi Times

In its latest report, the Singaporean bank predicts that Vietnam's growth momentum will continue, although risks remain. The upward trend observed in the last three quarters of 2024 - at 6.93%, 7.43%, and 7.55%, respectively - helped the country achieve an annual GDP growth rate of 7.09% last year.

The General Statistics Office highlighted several positive indicators in the first two months of the year. Industrial production recorded its highest growth in five years, import-export turnover rose by 12%, and public investment surged by 21.7% year-on-year, contributing to overall economic expansion.

However, UOB remains cautious, citing Vietnam's high economic openness as a vulnerability to global trade disruptions and geopolitical conflicts, in addition to US President Donald Trump's focus on addressing trade deficits.

"It is worth noting that the US trade deficit with Vietnam has nearly quadrupled since 2016, reaching US$124 billion in 2024," the report said.

UOB maintains its full-year GDP growth forecast for Vietnam at 7%. Meanwhile, the Vietnamese dong (VND) is expected to weaken further, possibly reaching a low of VND26,000 per USD in Q3. The bank expects the State Bank of Vietnam to keep the refinancing rate at 4.5%, balancing rising inflation with downward pressure on the currency.

As for the National Assembly's growth targets - at least 8% this year and double-digit growth from 2026 to 2030 - UOB believes they are achievable, but warns that exports and manufacturing alone will not be enough. Vietnam needs to boost investment, particularly in public infrastructure, to sustain long-term growth and mitigate potential downturns in global trade.

For more than a decade, Vietnam's investment-to-GDP ratio has hovered around 30%, while China has consistently maintained a ratio above 40% over the same period. "This indicates that Vietnam is investing at a lower level than its larger neighbor, and there is clearly room to accelerate public investment, especially as the government aims for double-digit growth in the future," UOB said.