In the second quarter of 2024, Vietnam’s economic growth exceeded expectations, primarily fueled by rapid expansion in manufacturing and continued robustness in the service sectors. Vietnam’s GDP growth surged to 6.93% year-on-year in Q2 2024, representing the strongest expansion since Q3 2022 and the 11th consecutive quarter of growth.
Vietnam’s economic growth has surpassed the Ministry of Planning and Investment’s initial forecasts, with figures reaching beyond the expected 5.85% to 6.32% after the first quarter. This robust growth puts Vietnam on a promising path to achieve its 2024 goal of 6.5-7%. Prime Minister Pham Minh Chinh has declared the continuation of a flexible monetary policy aimed at reducing bank lending rates and bolstering public investment. By June 2023, the average annual lending rate decreased to 8.3%, marking a 0.96 percentage point drop from the end of the previous year. Concurrently, the average deposit rate fell to 3.59% per annum, showing a 1.08 percentage point decline. Credit growth maintained a positive trajectory, reaching 6% by the second quarter’s close. In terms of public investment, the government plans to allocate approximately 26.4 billion USD in 2024, with a significant emphasis on the development of transportation infrastructure.
Yet, despite these positive developments, the disbursement rate of investment capital stood at just 29.39% as of June 2024, which is lower than the previous year’s figure for the same period. By mid-2024, around 7.9 billion USD had been disbursed, leading to calls for enhanced management and coordination to accelerate the disbursement process and achieve the annual goal of disbursing at least 95% of the allocated funds.
Manufacturing and Services Sectors Lead Economic Growth
In the second quarter of 2024, Vietnam’s economic expansion was spearheaded by the industry and construction sector, which saw an impressive 8.29% growth compared to the previous year, largely driven by a surge in manufacturing output. Concurrently, the service sector experienced a significant upturn, registering a 7.06% increase. The export sectors, particularly electronics and seafood, also made substantial contributions to the nation’s economic performance. However, the agriculture, forestry, and fishery sector encountered setbacks due to a widespread drought, resulting in a modest growth of 3.34%.
A closer examination of the economic sectors’ contributions reveals that services held the largest share, contributing 43.34% to the GDP, with industry and construction close behind at 37.04%. The agriculture, forestry, and fishery sector added 11.30% to the GDP. These figures underscore the pivotal role of the service and industrial sectors in driving Vietnam’s economic growth in this period.
In the first half of 2024, Vietnam’s GDP growth achieved a robust 6.42% year-on-year, marking it as the second-highest growth rate since 2020, only slightly trailing behind the 6.58% seen in 2022. The agriculture, forestry, and fishery sectors contributed 5.96% to the value-added growth with a 3.38% increase. The industry and construction sectors were the standout performers, expanding by 7.51% and contributing 44.28% to the growth. The service sector grew by 6.64%, accounting for the largest share of growth at 49.76%.
The economic composition in the first six months showed the service sector at 43.35% of the GDP, followed by industry and construction at 36.44%, and agriculture, forestry, and fisheries at 11.55%. The product taxes less subsidies made up 8.66%. Tourism experienced a significant rebound, with 8.8 million international tourists in the first half of the year, up 58.4% from the previous year and surpassing the pre-pandemic levels of 2019 by 4.1%.
In terms of GDP expenditure, the first quarter saw final consumption rise by 5.78% year-on-year, contributing 64.26% to the total growth rate. Asset accumulation grew by 6.72%, accounting for 35.15% of the growth. Trade also showed positive dynamics, with exports and imports increasing by 16.89% and 16.95% respectively, the net effect of which contributed 0.59% to the overall GDP growth.
Inflation Pressures Rise in Mid-2024, Triggering Government Action
Vietnam faced heightened inflationary pressures in June 2024, with the consumer price index climbing 4.34% from the previous year, nearing the government’s annual limit of 4.5%. The CPI’s average rise for the year’s first half stood at 4.08%, marking an increase from the prior year’s corresponding period. The State Bank of Vietnam countered these inflationary tendencies by reducing interest rates throughout 2024, aiming to strike a balance between economic growth and price stability. In a move to further stabilize prices, the government, through Decree 85/2024/ND-CP issued in July 2024, introduced controls on the cost of essential commodities, particularly in the energy and food sectors. Despite a 30% increase in state employees’ base salaries and a 15% rise in retirees’ pensions commencing in July 2024, vigilant measures are in place to monitor liquidity and maintain inflation within the predetermined bounds.