Vietnam’s retail sales growth registered 9.3 percent year on year in December 2023, marking the 25th straight month of expansion in the industry, according to a report released on Thursday by BMI, a unit of Fitch Solutions.
The December 2023 figure fell considerably from 20 percent at the start of the year, largely a result of the after-effects of the COVID-19 pandemic.
In 2024, retail sales growth is expected to remain stable, supported by a wider economic outlook, according to the report.
With regard to the consumer spending outlook, BMI forecasts that Vietnam's household spending expansion will be strong in 2024 as real growth returns to a more stable trajectory.
In 2024, household spending is expected to grow 7.1 percent year on year, higher than the pre-pandemic figure in 2019.
The forecast for household spending in 2024 anticipates a return to growth levels seen before the COVID-19 pandemic.
During the period from 2015 to 2019, household spending exhibited a real average growth rate of 6.6 percent.
Easing inflation and a tight labor market will support spending, as wage expansion remains stable, supporting purchasing power over the year, BMI said in its report, which also noted that the local real estate and financial sectors remain weak.
“Over 2024, we forecast the Vietnamese dong to depreciate against the U.S. dollar, weakening from VND23,800/USD in 2023 to VND24,350/USD in 2024,” the report reads.
Vietnam continues to heavily depend on imports to satisfy local demand, and the depreciation of the currency is expected to pose challenges to the growth of consumer spending, as the cost of imports rises.
In Vietnam, inflation has been on an upward trend, fueled by increased domestic economic activity leading to a rise in imports.
The ongoing depreciation of the dong further exacerbates the situation, putting pressure on the prices of imported goods.
“The latest reading, at 3.6 percent year on year in December 2023, is lower than the average 4.5-percent inflation our team forecasts for 2024, suggesting that price inflation will be sticky over the year,” according to BMI.
The report indicated that inflation persists at higher levels but remains within manageable limits.
In Vietnam, the unemployment rate came in at 2.26 percent in the fourth quarter of 2023, having fallen from 2.3 percent in the first quarter of the year.
BMI forecasts the rate will average 2.1 percent in 2024 as the expanding economy stimulates job creation.
The tightening of the labor market will improve workers' wage prospects and therefore support consumer spending.