Vietnam's economic growth unexpectedly surged in the last quarter, driven by robust manufacturing and exports, although a super typhoon in September caused significant damage and raised concerns about a difficult end to the year.

According to the General Statistics Office, the country's GDP grew by 7.4% in the three months ending in September compared to the previous year, surpassing the 6.1% median estimate from a Bloomberg survey and the revised 7.09% growth from Q2.

Vietnam's economy has demonstrated resilience this year, buoyed by strong investment inflows, with Prime Minister Pham Minh Chinh committing to reducing logistical costs and enhancing infrastructure.

The government has actively attracted capital from foreign tech giants like Samsung Electronics Co. and Intel Corp., positioning Vietnam as a strong alternative to China for producing electronics such as smartphones and basic semiconductors, Bloomberg reports.

Investment and manufacturing are among “the driving forces for growth” in Q3, the statistics office said.

Significant gains in agriculture and other sectors during July and August helped mitigate the impact of the severe crop damage caused by Super Typhoon Yagi in September, noted Nguyen Thi Huong, head of the General Statistics Office.

Typhoon Yagi devastated Vietnam's northern provinces, claiming hundreds of lives and causing economic losses estimated at over $3 billion. The storm's impact was severe enough to cause factory activity in the trade-dependent economy to contract in September, marking the first decline in five months, according to an S&P Global Purchasing Managers’ index report.

In addition, the government's revised GDP growth target of 6.8% to 7% for 2024 will be “a big challenge” due to the combined effects of Typhoon Yagi, geopolitical tensions, and global economic uncertainties, said Nguyen Thi Huong at a briefing in Hanoi. Authorities had earlier predicted that Yagi would reduce this year’s growth by 0.15 percentage points.

Mitsubishi UFJ Financial Group Inc. suggested that the State Bank of Vietnam may “turn more dovish” by lowering interbank interest rates to support the economy in the aftermath of the storm.

Moreover, the International Monetary Fund (IMF) anticipates Vietnam's economy to grow by 6.1% this year, a slight increase from its previous forecast. This growth is supported by “continued strong external demand, resilient foreign direct investment, and accommodative policies,” according to a statement released on 27th September.