Macro/ Strategy

Industrial production, services and investment all grew quite well in 5M2024. The Index of Industrial Production (IIP) of 5M2024 increased by 6.8% YoY while it decreased by 2% in the same period in 2023. PMI in May was flat at 50.3 thanks to the increase in new orders. The service sector maintains recovery with retail sales in 5M2024 growing by 8.7% YoY (compared to the growth of 12.3% in same period in 2023), thanks to positive contribution of tourism sector. Total import and export turnover of goods in 5M2024 reached USD 305.5 billion (+16.6% YoY) and trade balance still had a surplus of USD 8 billion despite it becoming deficit around USD 1 billion in May 2024. Disbursement of public investment capital and FDI both recorded positive growths, reaching USD 7.6 billion (~VND 190.6 trillion, +5% YoY) and USD 8.3 billion (+7.8% YoY), respectively. 

Control inflation and flexibly manage exchange rates. CPI in May increased slightly by 0.05% compared to the previous month and average CPI of 5M2024 increased by 4.03% YoY, still within the target range of 4-4.5%. The exchange rate shows signs of being more stable and VND on the free market depreciated by 4.4% YTD to USD as of the end of May 2024. The State Bank of Vietnam (SBV) has implemented a series of solutions to stabilize Vietnam dong and pressure of exchange rate will ease in the second half of 2024 thanks to the prospect of interest rate cuts by major central banks. ECB cut interest rates for the first time since 2019 on June 6, 2024, while FED is expected to have one rate cut in 2024 and four rate cuts in 2025 with total reduction of 1.25%. 

Continue to reduce lending interest rates to promote credit growth, striving to reach 5-6% by the end of Q2 2024. This is the recent direction of SBV in the context of credit growth in 5M2024 was very slow, estimated to reach 2.41% YTD, far from the year target of 15%. By enhancing digital transformation, simplifying lending procedures, and reducing costs, commercial banks may further reduce lending interest rates by 0.5-1% from now until the end of the year to support businesses and promote credit and economic growth.