Vietnam: Strong GDP but rising inflation risks – Commerzbank

Commerzbank Research highlights Vietnam’s Q3 GDP growth at 10.0% year-on-year, the strongest since the pandemic, driven by investment and industry. Achieving the government’s 10% full-year target would require an unusually strong Q4. September CPI rose to 5.1%, above the 4.5% target on average, with elevated Oil prices and rapid credit growth constraining SBV’s room for additional monetary support.

Growth-led but inflation constraints

"Q3 GDP beat expectations, rising 10.0% yoy (Bloomberg consensus: 8.7%) vs 8.8% in Q2, which was revised up from 8.4% initially. This marked the strongest growth since the pandemic, bringing year-to-date expansion to 8.9%. This implies that Q4 has to expand by 12.5% to achieve the government’s full-year target of 10%. While growth momentum should remain strong in Q4, achieving the target would require an unusually large further acceleration."

"Nguyen Thu Oanh, the head of the National Statistics Office, stated that “as capital flows into production, investment and consumption, its impact could become more evident in the final months of the year”."

"The strong growth was broad-based but remained heavily driven by investment and industry. It reflects the continued capacity expansion amid the diversification away from Chinese supply chains. Industry and construction grew 12.5% yoy in Q3, while services expanded 9.5%. Manufacturing rose 11.4% yoy vs 10.8% in Q2, contributing 2.8%-points to headline growth. Construction jumped 12.2% vs 8.9% in Q2 due to resilient foreign investment interest."

"Overall, the robust Q3 growth has been largely investment led. Growth momentum should continue in Q4, but this could raise demand-side price pressures. Furthermore, upside risks to inflation are elevated due to higher global oil prices amid the conflict in the Middle East."