Vietnam is poised for stronger growth in 2024, but its economic rebound remains uneven, according to HSBC's latest report.

Despite a slower-than-expected expansion of 5.7% in the first quarter, the bank maintains its full-year growth forecast of 6%. However, the recovery hinges largely on invigorating the domestic services sector, which has lagged in comparison to Vietnam's booming export trade.

The country's export sector has been a key driver of growth. Boosted by a resurgence in the electronics cycle – largely thanks to Samsung's production – exports surged 14% in March, marking a strong quarterly rebound. HSBC analysts believe this trend will continue, benefiting Vietnam's overall outlook.

Meanwhile, the domestic scene tells a different story. Service industries catering to Vietnam's local market still struggle to recover, reflected in slower retail sales and a stagnant real estate sector. But tourism is a bright spot – foreign arrivals reached pre-pandemic levels in March, a trend driven by the return of Chinese tourists.

Foreign direct investment (FDI) offers further grounds for optimism. Greenfield FDI has risen a notable 60% this year, with Singaporean investors taking the lead.

"The indicators continue to point to sanguine trade outlook, largely thanks to an upturn in the electronics cycle," commented HSBC's ASEAN Economist, Yun Liu. "Not only has the short-term trade cycle turned, but the long-term positive FDI prospects also carry on."

To cement its recovery and reach pre-pandemic growth, Vietnam must see its lagging domestic services sectors join the momentum established by its export industry.

Inflation remains in check at present, but analysts note the risks posed by rising rice costs and potential volatility in energy markets. HSBC projects a 3.9% average inflation rate for 2024. While this figure may be higher than previous years, it remains below the State Bank of Vietnam's target and is unlikely to trigger immediate interest rate adjustments.