Macro Update - FDI registrations reach highest monthly level since December 2019

- Production continued its trend of recovery. The overall index of industrial production (IIP) grew 5.5% MoM and 4.1% YoY in October, in which IIP of the manufacturing sub-sector increased 6.2% MoM and 4.8% YoY - the highest monthly YoY growth since February 2023. In 10M 2023, overall IIP and IIP of the manufacturing sub-sector both inched up 0.5% YoY. According to S&P Global’s Vietnam Manufacturing Purchasing Manager Index (PMI) survey, new orders and new export orders increased for the third consecutive month. Also, job cutting ended after a seventh-month period. We expect that production could continue to improve in the coming months due to the recent increase in new orders, clearer signs of improvement for imports, and the upcoming holiday seasons (Christmas, New Year, and Lunar New Year).

- Retail sales remained stable. Total retail sales of goods & services rose by 1.5% MoM and 7.0% YoY in October. In 10M 2023, total retail sales increased 9.4% YoY (+6.9% YoY in real terms), partly due to strong retail sales of educational accessories (+13.6% YoY), food/foodstuffs (+11.2% YoY), accommodation & catering services (+14.9% YoY), and tourism (+51.4% YoY). We expect that the ongoing recovery of tourism, particularly foreign inbound tourists, could continue to boost retail sales. Meanwhile, retail sales of goods could improve strongly in December and January as the holiday season coming.

- Public investment slowed in October. In terms of budget expenditures, spending for investment & development surged by 35.0% YoY to VND401.9tn (USD16.7bn), fulfilling around 55.3% of the annual plan. However, spending for investment & development in October was only VND38.6tn/USD1.6bn – the lowest October figure since 2019. Nevertheless, we expect the Government to boost public investment in the last two months of this year to support economic growth. Our expectation is based on the Government’s habit of expediting the disbursement of public investment as the year ends. In 2022, public investment reached 56.6% of the annual target in 10M 2022, 64.3% in 11M 2022, 82.8% in 12M 2022, and 121.3% in FY 2022 (according to the second estimate released by the MoF).