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Vietnam sees Q3 GDP growth capped by weak external demand

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By Khanh Vu and Phuong Nguyen

HANOI () -Vietnam’s gross domestic product growth accelerated in the third quarter from the previous three months, data showed on Friday, but fell short of this year’s growth target as dull demand for exports overshadowed support from monetary easing.

GDP in the July-September quarter is expected to have grown 5.33% from a year earlier, faster than the 4.05% expansion in the second quarter, the General Statistics Office said in a report on Friday.

Capital Economics said the worst for Vietnam’s economy was over but growth remained subdued by past standards. With inflation becoming a growing concern, however, it did not expect a further rate cut from the central bank.

The third-quarter figure was much slower than growth of 13.71% in the same period of 2022, when its manufacturing-led economy managed a post-pandemic pickup following a 6% quarterly contraction in 2021.

Factory powerhouse Vietnam is targeting growth of 6.5% this year, down from 8.02% last year, but most economists expect that will not be attained.

The International Monetary Fund on Wednesday forecast Vietnam’s growth this year at 4.7%, while the Asian Development Bank this month cut its forecast to growth of 5.8% from 6.5% predicted in April. That still makes it the fastest-growing country in Southeast Asia.

Vietnam’s central bank in the first half of the year cut its policy rates four times to spur growth but weak global demand for major exports such as electronics, textiles and footwear has kept firms from expanding production.

Second-quarter GDP growth was revised down from 4.14%.

The latest growth numbers showed the economy “is in good trend” the statistics office said in the report.

In the month of September, industrial production rose 5.1% from the same period a year earlier, while exports rose 4.6%. Retail sales rose 7.5% and consumer prices were up 3.66%, the report said.

The State Bank of Vietnam’s interest rate cuts coupled with weak global demand has resulted in excess liquidity in the banking system.

The central bank has over the past week issued up to 70 trillion dong ($2.87 billion) of 28-day bills to absorb liquidity and to stabilise the exchange rate, according to SSI Research. The dong has lost about 3% against the U.S. dollar so far this year.

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