Macro Update - Economic data remains solid in 2M 2024

- Production slowed in February; PMI rises for second consecutive month. In February, the overall index of industrial production (IIP) fell 18.0% MoM and 6.8% YoY due to the Tet Holiday. Similarly, IIP of the manufacturing sub-sector declined 18.6% MoM and 6.5% YoY. However, in 2M 2024, the overall IIP and IIP of the manufacturing sub-sector still remained solid, increasing 5.7% YoY and 5.9% YoY, respectively (vs -6.3% YoY & -6.9% YoY in 2M 2023). Meanwhile, positive PMI results, including improving new orders, employment level, in addition to a one-year high in business confidence could continue to support production in the coming months.

- Tet and tourists help to enhance retail sales. Retail sales of goods & services increased 8.5% YoY in February, driven by high consumption demand and tourists during the Tet Holiday. Total retail sales in 2M 2024 increased 8.1% YoY in nominal terms (vs +14.7% YoY in 2M 2023) and 5.0% YoY in real terms (vs +10.9% YoY in 2M 2023). In 2M 2024, retail sales of goods increased 6.8% YoY, supported mainly by retail sales of household equipment (+18.1% YoY), food & foodstuffs (+10.8% YoY) and textile & garment (+9.8% YoY). According to the PMI report, employment level increased for the first time in four months, while several provinces report high recruitment demand from firms due to new orders increase are positive signals for the retail sales outlook. Meanwhile, the ongoing increase in international arrivals could continue to support retail sales, particularly retail sales of tourism and accommodation & catering services.

- Spending for investment and developments surged in 2M 2024. According to the MoF, total State revenue and expenditure amounted to VND399.4tn (USD16.2bn; +10.4% YoY) and VND260.7tn (USD10.6bn; 7.7% YoY), completing 23.5% and 12.3% of the annual plan, respectively. As a result, the State budget posted a fiscal surplus of VND138.7tn (USD5.6bn) in 2M 2024 (vs a surplus of VND120.3tn or USD4.9bn in 2M 2023). Notably, State spending for investment & development surged 21.8% YoY to VND60.0tn (USD2.4bn), completing 8.9% of the annual plan. We expect the Government to continue to boost public investment disbursement in the coming months to stimulate economic growth in 2024.