Vietnamese Dong likely to strengthen towards year end: UOB

The US$ traded up to a new high of VND24,700 a dollar late February alongside broad US$ strength against Asian peers.

Recovery momentum intact in 2024

Viet Nam ended 2023 in a positive note, as economic growth accelerated to 6.72 percent year-on-year in Q4/2023, from 5.33 percent in Q3/2023 and 4.14 percent in Q2/2023, driven by a rebound in manufacturing while both services and agricultural sectors provided further support.

The underlying drivers had been a recovery in external trade towards the tail end of 2023 as well as policy support measures including the central bank's rate cuts and credit policy which helped tide the country over a challenging year.

Viet Nam's purchasing managers' index (PMI) showed that both January and February 2024 prints were above 50, compared to the average 49.3 reading in Jan-Feb 2023.

"These data suggest that the overall momentum in the external trade and manufacturing sectors is showing positive signs and we expect the pace to sustain especially in the second half of 2024 when the recovery in the semiconductor sector is more entrenched and global central banks embark on a more accommodative policy stance," UOB analysts said.

While risks of external events continue to weigh on global economic prospects, Viet Nam's prospects are bolstered by the recovery in the semiconductor cycle, stable growth in China and the region, as well as supply chain shifts that are in favor of Viet Nam and ASEAN.

The UOB maintains its growth forecast for Viet Nam at 6 percent for 2024, which is within the official 6-6.5 percent target./.