DECEMBER 2 0 2 4 VIETNAM MACRO MONITORING Photo credit: Shutterstock WHAT’S NEW? • Industrial production improved in November 2024, driven by an increased production of key export and manufactured products. While staying in expansionary territory, Viet Nam’s PMI inched down slightly from 51.2 in October to 50.8 in November as growth of new orders softened. • Exports and imports growth continued to slow, driven by a contraction of tech exports (phones and equipment) and a small deceleration of non-tech exports (including footwear and textile) due to weaker global demand and lingering supply chain disruptions caused by typhoon Yagi. Year-on-year exports growth moderated from 10.2 percent y/y in October to 8.2 percent y/y in November. Mirroring the moderation of export growth, import growth decelerated from 13.6 percent y/y in October to 9.8 percent y/y in November. The trade balance registered a small surplus of 1.1 billion US$ in November 2024 and totaled US$ 23.8 billion in the first 11 months of 2024. • Sequentially, retail sales growth stagnated (-0.1 percent m/m, SA) in November 2024, following the 2.7 percent expansion (m/m, SA) in October. It registered 8.8 percent y/y remaining well below pre-covid levels (12 percent y/y during 2017-2019), signaling continued subdued domestic demand. On November 30, 2024, the National Assembly approved a further extension of the 2-percent reduction on value-added tax (VAT) rate (from 10 percent to 8 percent) until the end of June 2025 instead of end of 2024 to support domestic demand. • Consumer Price Index (CPI) inflation decreased slightly from 2.9 percent in October to 2.8 percent in November , driven by moderation in food prices and transport costs. Average CPI of the first 11 months of 2024 was 3.7, below the policy target set for 2024 (4-4.5 percent). • FDI commitment surged in November 2024 to US$ 4.1 billion from US$ 2.5 billion in October 2024, driven by commitments in manufacturing sector, leading to cumulative FDI commitment for the 11 months of 2024 reaching US$31.4 billion (+1 percent compared to the same period in 2023). • As of the end of November 2024, credit growth was estimated at 16.6 percent y/y . Fast credit growth was attributed to strong export growth, recovery of business operations in manufacturing and trade services. • The VND/USD market rate had depreciated by 4.2 percent y/y as end of November 2024 , due to the global strengthening of the dollar. The average overnight interbank interest rate surged from 3.6 percent to 4.8 percent, reflecting continued tightening of the liquidity by the SBV. • Revenue collection during the first 11 months of 2024 was 16.1 percent higher than during the same period in 2023 , due to improved economic activities. Revenue collection reached 106.1 percent of what had been planned for 2024. Public investment disbursement rate accelerated from 52.3 percent of the Prime Minister’s approved budget allocation in October 2024 to 73.5 percent in November 2024. However, it remained slightly below 76.5 percent disbursement rate from the same period of last year. TO WATCH • Trade growth moderation since September should be monitored. Global uncertainties, including anticipated policy shifts in US trade policy could impact Viet Nam’s trade growth in 2025. • FDI commitments in high value-added manufacturing and tech activities announced in November could support the medium-term outlook by improving productivity and upgrading the country’s participation in the global value chains. Latest FDI commitments include: LG Display’s additional US$ 1 billion investment over the next five years in Haiphong to boost OLED display production; Google ‘s opening of its Viet Nam office in April 2025; and Nvidia’s commitment to open a R&D center to develop AI in the country. • Chronic under-disbursement in public investment continues to be a concern and could undermine infrastructure development for sustained growth in the medium-term. PAGE 1 D E C E M B E R 2 0 2 4 • V I ET N AM MAC RO MO N ITORI N G RECENT ECONOMIC DEVELOPMENTS Industrial production increased in November Retail sales growth stagnated 2024 Sequentially, retail sales growth was flat in November 2024 at - November data showed an improvement in economic 0.1 percent (m/m, SA), following the 2.7 percent expansion (m/m, activities. The Index of Industrial Production (IIP) registered SA) registered in October (Figure 3). Retail sales of goods, which a growth rate of 1.6 percent (m/m) in November, compared account for almost 80 percent of total retail sales, declined by - to 1.1 percent (m/m, SA) in October. In terms of year-on- 0.4 percent (m/m, SA). Year-on-year, retails sales growth grew by year, IIP grew 8.9 percent (y/y) in November compared to 8.8 percent, remaining well below the pre-pandemic growth rates 7.0 percent (y/y) in October (Figure 1). The improvement is of about 12 percent y/y during 2017-2019. due to the increased production of key export products such as textiles and electronics. Manufacturing production Figure 3: Retail sales for domestic consumption such as food and beverages also Percent (m/m and y/y, SA) expanded. While staying in expansionary territory, Viet Month-on-month (SA) Year-on-year (NSA) Nam’s PMI inched down from 51.2 in October to 50.8 in November (Figure 2). S&P Global PMI indicated growth in 20% new orders slowed due to global export demand weakness and lingering disruptions in supply chain and logistics from September’s Yagi typhoon. 10% Figure 1: Index of Industrial Production 0% Percent -10% Month-on-month (SA) Nov-22 May-23 Nov-23 May-24 Nov-24 20 Year-on-year (NSA) Exports and imports growth continued to slow. 10 Sequentially, exports and imports contracted this month by (-2.1 0 percent m/m SA and -3.0 percent m/m SA, respectively (Figure 4), mainly driven by contraction of tech exports (phones and -10 equipment) due to subdued global demand and a small moderation of non-tech exports (including textiles and footwear) -20 (Figure 5). As a result, year-on-year exports growth has continued Nov-22 May-23 Nov-23 May-24 Nov-24 to trend down since August 2024, moderating from 10.2 percent y/y in October to 8.2 percent y/y in November. Mirroring the Figure 2: Manufacturing PMI moderation of export growth, import growth decelerated from 50+ = Expansion (SA) 13.6 percent y/y in October to 9.8 percent y/y in November (Figure 4). The trade balance in the first 11 months of 2024 was US$ 23.8 Viet Nam Global ASEAN billion, 9.4 percent less than the same period last year when imports recovered faster than exports. 55 Figure 4: Merchandise trade Percent Imports (cif, m/m, SA) 50 Exports (fob, m/m, SA) 50 30 45 10 Nov-22 May-23 Nov-23 May-24 Nov-24 -10 -30 Nov-22 May-23 Nov-23 May-24 Nov-24 PAGE 2 D E C E M B E R 2 0 2 4 • V I ET N AM MAC RO MO N ITORI N G Figure 5: Merchandise export growth by product type Figure 7: Contribution to CPI inflation Percent (3m/3m, SA) Percent & percentage point (y/y) Food Housing Transport Non-tech exports Total exports Health & edu. Others Headline Tech exports Core 20% 6 10% 4 0% 2 -10% 0 -20% -2 Nov-22 May-23 Nov-23 May-24 Nov-24 Nov-22 May-23 Nov-23 May-24 Nov-24 FDI commitment surged and FDI disbursement Credit growth accelerated in November 2024. remained resilient. As end of November 2024, credit growth was estimated at 16.6 FDI commitment surged in November 2024 to US$ 4.1 percent y/y, compared with 11.3 percent in November 2023 billion, driven by commitment in manufacturing sector (Figure 8). This acceleration was attributed to strong export (Figure 6). Consequently, FDI commitment for the 11 growth and recovery of business operations in manufacturing months of 2024 reaching US$31.4 billion, reflecting production and trade services. continued investors’ confidence in Vietnam’s economic prospects. Newly registered FDI rose in electronics Figure 8: Credit growth manufacturing and other high value-add sectors including Percent (NSA) LG Display’s additional US$ 1 billion investment over the next five years in Haiphong to boost OLED display Month-on-month Year-on-year (LHS) production; Nvidia’s commitment to open a R&D center to develop AI in the country; and Google‘s opening of its Viet 18.0 5 Nam office in April 2025. As of end of November, FDI 16.0 SBV's target disbursement was US$21.7 billion, 7.1 percent higher than 14.0 4 a year ago. 12.0 10.0 3 Figure 6: Foreign direct investment 8.0 US$ billion (NSA) 2 6.0 Others Electricity, gas & water 4.0 1 Real estate Wholesales & retail 2.0 Manufacturing Disbursement 0.0 0 8 Nov-22 May-23 Nov-23 May-24 Nov-24 6 4 The SBV tightened liquidity in response to exchange 2 rate pressure. 0 The VND/USD market rate had depreciated by 4.2 percent y/y as -2 end of November 2024 (Figure 9), due to the global Nov-22 May-23 Nov-23 May-24 Nov-24 strengthening of the dollar. The dollar index (DXY) continued to increase from 104.0 in October to 107.5 by end of November, in Headline inflation and core inflation stayed well the aftermath of the US elections. The average overnight below the policy target. interbank interest rate surged from 3.6 percent to 4.8 percent (Figure 10), reflecting continued tightening of liquidity by the The Consumer Price Index (CPI) inflation decreased slightly SBV. from 2.9 percent in October to 2.8 percent in November, driven by the moderation of food prices and transport costs (Figure 7). Average CPI of the first 11 months of 2024 was 3.7, well below the policy target set for 2024 (4-4.5 percent). Core inflation continued to increase slightly, registering 2.8 percent (y/y) in November 2024, compared with 2.7 percent (y/y) in October. PAGE 3 D E C E M B E R 2 0 2 4 • V I ET N AM MAC RO MO N ITORI N G Figure 9: Exchange rate VND/USD Central rate Market rate 26,000 25,000 24,000 23,000 22,000 Nov-22 May-23 Nov-23 May-24 Nov-24 Figure 10: Interest rates Percent Discount Refinancing Overnight Interbank (AVG) 6 4 2 0 Nov-22 May-23 Nov-23 May-24 Nov-24 Revenue collection improved and public investment disbursement accelerated. Revenue collection during the first 11 months of 2024 was 16.1 percent higher than in the same period of 2023, equivalent to 106.1 percent of planned revenue, due to improved economic activities. Disbursement of public investment accelerated from 52.3 percent of Prime Minister’s approved budget allocation in October 2024 to 73.5 percent in November 2024. However, it was still below 76.5 percent disbursed in the same period of last year. Sources and notes: All data are from Haver and sourced from the Government Statistics Office (GSO) of Vietnam, except: Government budget revenues and expenditures (Ministry of Finance), FDI (MPI); PMI and producer price inflation (survey by S&P Global, Nikkei and IHS Markit; Purchasing Managers' Index is derived from a survey of 400 manufacturing companies and is based on five individual indexes on new orders, output, employment, suppliers’ delivery times (and stock of items purchased). It is seasonally adjusted. A reading above 50 indicates an expansion of the manufacturing sector compared to the previous month; below 50 represents a contraction, while 50 indicates no change); Credit growth (staff calculations based on local official media reporting on SBV’s estimates). SA=Seasonally Adjusted; NSA=Not Seasonally Adjusted; LHS = Left-hand Scale; FOB = Free on Board; CIF = Cost, Insurance, and Freight; m/m = month-on-month; y/y = year-on-year. PAGE 4