ADB Country Director for Vietnam Andrew Jeffries and leaders at the press conference. Photo: VNA

After a strong performance in 2022, Vietnam’s economic growth is expected to moderate at 6.5% this year and further expand at 6.8% in 2024, VNA citied Asian Development Outlook (ADO) released by the Asian Development Bank (ADB) on April 4.

Vietnam’s economic growth will be constrained in 2023 by the global economic slowdown, continued monetary tightening in advanced economies, and spillover from global geopolitical tensions, said ADB Country Director for Vietnam Andrew Jeffries.

However, he held that Vietnam’s growth support policy with monetary easing, a large amount of public investment to be disbursed in 2023, and the reopening of China will help the country counter these headwinds.

The ADO highlighted that the global economic slowdown deepened in the fourth quarter of 2022 and will likely continue in 2023. Falling global demand is expected to weigh on industrial growth, it said, adding that agriculture output is expected to grow by 3.2% this year on revived domestic demand and the reopening of China, which accounts for 45% of Vietnam’s export of fruits and vegetables.

Tourist arrivals from China starting March 15 are expected to benefit tourism and services in Vietnam, with the sector forecast to grow by 8.0% this year.

The manufacturing purchasing managers’ index sank below 50 for four consecutive months as export-driven manufacturing contracted while consumption-led manufacturing was unable to take up the slack, then the index revived from 46.4 in January 2023 to 51.2 in February 2023. Industry growth is forecast to slow to 7.5%

Public investment will be another key driver for economic recovery and growth in 2023 and 2024, spurring construction and other related economic activities. Along with the move to monetary easing in March 2023, public spending is expected to generate substantial multiplier effects, creating a strong growth stimulus for the economy.

According to the ADO, the Vietnamese government is committed to disbursing USD 30 billion in the year, of which 90% had been allocated to disbursing ministries and provinces as of January 2023.

Foreign investment, however, will still be hampered by the global economic slowdown. Newly registered and disbursed FDI fell by 38% and then 4.9% year on year in the first two months of 2023.

The prolonged pandemic, however, exposed structural issues that are among the main downside risks to the economy, said the report.

Nguyen Minh Cuong, Principal Country Economist for Vietnam, said that the fiscal deficit in 2023 could exceed the target, which is 4.4% of GDP.

He said that Vietnam should continue reform to make its finances more sustainable, significantly reducing dependence on unsustainable revenue sources such as land and oil.

Central Retail Corporation sees Vietnam as a high-potential market that posted continuous economic growth. Photo: VNA

The ADB forecast that on the demand side, domestic consumption will continue to rebound in 2023. Revived tourism, new public investment and stimulus programs initiated in January 2022, and a salary increase effective in July 2023 are expected to keep domestic consumption on the rise, though higher inflation may hamper its recovery.

Weakening global demand will continue to dampen trade in 2023. Exports in the first two months of 2023 decreased by 10.4% year on year, while imports dropped by 16%, it said.

Both imports and exports are forecast to shrink by 7% this year and next. Slowing trade could create a current account deficit that equals 1% of GDP this year before moving back into surplus in 2024.

The report also pointed out that surprise policy rate cuts make Vietnam the first economy in Southeast Asia to ease monetary policy with monetary and fiscal measures continuing to support the economy in the time ahead.

As of February 2023, Vietnam had attracted nearly USD 440 billion from 141 countries and territories.

Meanwhile, a report released by the Organisation for Economic Co-operation and Development (OECD) forecasts Vietnam's economy will grow by 6.6% this year and at a similar rate in 2024.

The report states that Vietnam’s economic growth is driven by foreign investment in the manufacturing sector, especially electronics, machine manufacturing, textiles, and footwear, and benefits from China's loosening of Covid prevention and control measures.

At this rate, the OECD believes that Vietnam continues to lead the top five largest economies in Southeast Asia.

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