Vietnam's H1 Growth at 6.42%: Recovery in Sight?

The recent data released by the General Statistics Office of Vietnam presents a positive picture of the country’s economic performance in the first half of 2024,with the Gross Domestic Product (GDP) growing by an impressive 6.42%.This growth rate marks a notable improvement compared to previous years,indicating a robust recovery phase following the challenges brought about by the global pandemic.

In terms of international trade dynamics,China continues to hold the title as Vietnam's largest source of imports,while the United States remains the primary destination for Vietnamese exports.According to the data from the Customs Administration released at the end of 2023,nearly 70% of the trade between China and Vietnam consists of intermediary goods.This highlights the interconnected nature of the supply chains between the two neighboring countries and underscores Vietnam's position as a crucial partner in regional trade.

During the 15th Summer Davos Forum on June 25,Vietnamese Prime Minister Pham Minh Chinh acknowledged the significant opportunities brought about by China's continuous development.He emphasized that China has taken on a vital role in addressing various regional and global challenges,thus influencing global industrial and value chains.This sentiment resonates with analysts who note the strong economic complementarity between China and Vietnam.Zhou Shixin,the director of the Southeast Asian Studies Center at the Shanghai Institute for International Studies,pointed out that Vietnam’s reliance on China,particularly at the upstream of production and industrial chains,is instrumental in elevating the trade scale.Ongoing cooperation in high-tech industries further expands the prospect for economic cooperation between the two nations.

A notable aspect of Vietnam's economic landscape is the rapid revival of its export sector.The revival pace exceeded the government’s expectations,with Nguyen Duc Hinh,head of the National Economic Comprehensive Department within the Ministry of Planning and Investment,predicting a growth rate of 6.2% for the second quarter of 2024 based on current trends.Ultimately,the statistics speak for themselves; the GDP growth rate for Q2 was confirmed at 6.93%,combining with Q1's 5.66% to yield an overall growth of 6.42% for the first half of the year.This statistic is remarkable,being only slightly lower than the 6.58% recorded in the first half of 2022,positioning it as the second-best performance in the period post-pandemic from 2020 to 2024.

As a typically export-oriented economy,Vietnam previously experienced significant downturns due to weaker global demand.Entering 2024,however,demand from key trading partners like the United States,South Korea,and Japan began to rebound,reigniting vitality in Vietnam's economy.A clear example of this resurgence can be seen in Vinatex,Vietnam's leading textile and garment group.Its CEO,Cao Uu Hieu,noted an increase in orders compared to the same period in 2023,with most affiliates of the group securing sufficient orders through October,while negotiations for additional contracts are ongoing.

Hieu attributes the recovery in textile exports not solely to an improvement in global demand but also to a shift where some orders are moving from other countries to Vietnam.Coupled with favorable exchange rate fluctuations since the start of the year,this transition has enhanced Vietnam's competitive edge in the international market.However,this revival is not confined to textiles alone.According to Pham Huy Son,the Director of the Department of Planning and Finance within the Ministry of Industry and Trade,Vietnam's export volume has shown strong recovery,with an anticipated growth of 13.8% in export value during the first half of this year.This growth encompasses a variety of sectors,notably in the export of cameras,camcorders and their components,as well as computers and electronic products.

In tandem with the upswing in external demand,foreign investment in Vietnam is also experiencing rapid growth.Data released by the Vietnamese statistics office indicates that foreign investments attracted in the first half of 2024 reached approximately $15.2 billion,reflecting a 13.1% increase compared to the same period in 2023.When examining the investment volumes,Singapore leads with an investment of $5.58 billion,followed by Japan with $1.73 billion.However,when considering the number of investment projects,China emerges as the frontrunner,accounting for 29.1% of the total foreign investment projects in Vietnam during the first half of the year.

In recent years,it has become a trend for global tech giants to establish their factories in Vietnam,leading to a significant influx of capital.NVIDIA's CEO Jensen Huang visited Vietnam in December last year,announcing an investment of approximately $250 million by NVIDIA.The company aims to establish a chip production center in Vietnam,intending to attract global talent and contribute to the development of Vietnam’s semiconductor ecosystem and artificial intelligence sector.

Since 2016,Vietnam has maintained its position as China's largest trading partner in ASEAN.A notable example is evident within the smartphone manufacturing sector,where demand for intermediary products such as integrated circuits,phone components,lithium-ion batteries,and LCD display modules produced in China has surged.Additionally,many Chinese companies are actively seeking to expand beyond merely supplying intermediary products and are boldly entering the Vietnamese market directly.

According to the Ministry of Foreign Affairs,Chinese investments in Vietnam have noticeably increased in recent years,as expressed by the Chinese ambassador to Vietnam,Xiong Bo,in October of last year.He highlighted a rising proportion of Chinese investments in the overall foreign capital attracted by Vietnam,noting a trend toward higher investment quality.This indicates a growing alignment with Vietnam's economic transition and upgrade needs,coupled with a noticeable increase in investments in sectors such as high technology,information communication,new energy,green development,and e-commerce logistics.

As noted by the International Monetary Fund (IMF) on June 26,Vietnam's economic growth rate in 2024 is estimated to reach nearly 6%,bolstered by strong international demand,stable foreign investment,and effective regulatory policies.Yet,despite the optimistic forecasts,Vietnam remains cautious about its economic outlook.According to Pham Huy Son,the second half of 2024 is anticipated to see continued reliance on a limited number of external markets for imports and exports,with geopolitical conflicts likely to sustain high transportation costs.Additionally,there are concerns that products exported to major markets such as the EU and the US may encounter potential trade barriers related to green transformation among trading conditions.