UOB: Exchange rate will decrease towards year-end

Vietnam's economy in the second quarter of 2025 grew beyond expectations

The Vietnam Economic Growth Report for the Second Quarter of 2025 conducted by the Global Economics and Market Research Department of UOB Bank (Singapore) stated that Vietnam's real GDP in the second quarter of 2025 recovered strongly, reaching an increase of 7.96% over the same period last year, far exceeding Bloomberg's forecast of 6.85% and UOB's forecast of 6.1%, as well as the adjusted level of the first quarter of 2025 of 7.05%.

In the first half of 2025, Vietnam's economy grew 7.52% year-on-year, the strongest growth in the first half of the year since data began in 2011.

UOB expects the SBV to keep its current policy rate unchanged, with the refinancing rate maintained at 4.50%.

According to UOB analysts, Vietnam’s outstanding growth in the first half of the year was mainly driven by exports boosted ahead of the tariff deadline, which rose sharply by 14% year-on-year, amid a recovery in market sentiment after US President Trump withdrew his “Liberation Day” tariff announcement on April 2 and instead applied a uniform 10% basic tariff to all trading partners within 90 days of tariff negotiations.

The latest developments in trade negotiations with the US are showing positive signs for Vietnam, after President Trump announced a 20% tariff on imports from Vietnam to the US, and 40% on transit goods. UOB believes that the most stressful period has passed and forecasts export growth in 2025 to be moderate.

Accordingly, UOB has revised up its forecast for Vietnam’s GDP growth in 2025 by 0.9 percentage points to 6.9%. GDP growth in the third and fourth quarters of 2025 is forecast at around 6.4%. Under these conditions, realized foreign direct investment (FDI) inflows are expected to reach around US$20 billion this year.

The State Bank will keep the policy interest rate unchanged at the present time.

With headline and core inflation remaining below the official target of 4.5% in the first half of 2025 and most of 2024, UOB believes the State Bank of Vietnam (SBV) is likely to consider easing monetary policy.

However, developments in the foreign exchange market are also an important factor for the SBV to consider. The Vietnamese Dong (VND) was the currency that depreciated the most in Asia in the first half of 2025, falling 2.5% against the USD. In contrast, currencies in the region benefited from the weakening USD, with gains ranging from 12% for TWD to 2.5% for CNH during the same period.

In addition, the positive growth performance of the economy in general may have reduced the pressure for policy easing. Therefore, UOB expects the SBV to keep the current policy rate unchanged, with the refinancing rate maintained at 4.50%.

However, if domestic business conditions and the labor market deteriorate significantly over the next 1-2 quarters, UOB believes the SBV could cut the policy rate once to the COVID-19 low of 4.00%, followed by a further 50bp cut to 3.50%, provided that the foreign exchange market stabilises and the US Federal Reserve (Fed) begins to implement rate cuts. For now, UOB ’s base case remains that the SBV will not change policy.

"We forecast that the VND will remain near the low end of its trading range against the USD until the end of 3Q25. However, in 4Q25, the VND may start to recover in line with the general recovery trend of Asian currencies as trade uncertainties ease. Our updated USD/VND forecasts are: 26,400 in 3Q25, 26,200 in 4Q25, 26,000 in 1Q26, and 25,800 in 2Q26," UOB said.

Source: https://baodautu.vn/uob-ty-gia-se-giam-ve-cuoi-nam-d325959.html