HÀ NỘI — Standard Chartered has released its latest macroeconomic updates for Việt Nam, forecasting the US dollar will strengthen in 2025 but weaken early in the year. The bank expects strong GDP growth of 6.7 per cent in 2025, with growth easing from 7.5 per cent year-on-year in the first half of the year to 6.1 per cent in the second half.

The US dollar is anticipated to strengthen in the second half of 2025 as fiscal and tariff measures under Trump 2.0 are clarified and implemented. Persistent inflation and structural factors, such as productivity, will influence foreign exchange market dynamics, with rate differentials remaining a key driver. In the long term, the sustainability of macro-stimulus measures will influence US dollar strength. Foreign and domestic investors might prefer inflation-protected assets if inflation uncertainty persists.

The US dollar may face a period of weakness early in 2025 due to continued Fed rate cuts and uncertainty about policy implementation. The lingering effects of rapid rate hikes and US dollar strength since October 2024 may further pressure the currency.

Recent Fed rate cuts were expected to support Asian currencies, including the Vietnamese đồng. However, stronger-than-anticipated US economic data has led to a less supportive environment for Asian FX markets. Trade policy uncertainties and inflation-inducing measures under Trump could further complicate currency stability in the region.

According to Standard Chartered’s economist, economic growth has remained resilient. Exports grew 14.9 per cent year-on-year in the first 10 months of 2024, while imports grew 16.8 per cent, with electronics exports and imports continuing their recovery. The manufacturing sector has experienced solid growth, and relatively accommodative monetary policy may have also contributed to the economic recovery so far this year. Foreign investment appetite remains strong, as indicated by inward FDI flows. Disbursed FDI increased by 8.8 per cent year-on-year while pledged FDI rose by 1.9 per cent in the same period. The manufacturing sector accounted for 62.6 per cent of total pledged FDI during that period, while the property sector’s share was 19.0 per cent, increasing from a year earlier.

Tim Leelahaphan, Standard Chartered economist for Thailand and Việt Nam, said: “We expect the State Bank of Việt Nam (SBV) to hike rates by 50bps in Q2 2025. The Government’s desire for stronger economic growth may support low interest rates for now. Inflation could rise again starting in Q2 2025; as such, we expect rate normalisation in Q2. Fed moves will also be key to the SBV’s policy decisions, in our view. Lower US dollar rates may help to reduce capital outflows, while a sustained trade surplus and strong tourism should support the Vietnamese; however, low import cover remains a challenge.”

Standard Chartered forecasts Fed rate cuts, which should lead to a softer US dollar bias over the next few quarters, resulting in an exchange rate of USD/VND at 25,250 by the end of 2024 and 25,450 by Q2 2025. — VNS