ADB: Vietnam's Economy Remains Resilient Amidst Global Uncertainty
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In a global economic context marked by uncertainties, Vietnam's economy has continued to recover strongly, and inflation has trended favorably.

Photo: VNA

The solid economic foundations have provided the basis for international organizations to maintain their growth forecasts for Vietnam in the current and coming years, despite the temporary disruptions and significant damages caused by Typhoon Yagi.

Solid economic foundation

In September, the Asian Development Bank (ADB) released its Asian Development Outlook (ADO) for September 2024, maintaining its growth forecast for Vietnam's economy at 6% in 2024 and 6.2% in 2025.

ADB Country Director for Vietnam, Shantanu Chakraborty, said that Vietnam's economy has recovered strongly in the first half of 2024 and will continue to maintain its growth momentum, despite global uncertainties. The steady recovery is the result of improved industrial production and strong growth in trade.

The industrial sector continues to be the main driver of growth, as external demand for key export electronic products has contributed to increased production.

The recovery has also been supported by the recovery of the service sector and stable agricultural output. In the first eight months of 2024, exports and imports recovered strongly, increasing by 15.8% and 17.7%, respectively, compared to the low base of the same period in 2023.

Vietnam's economy is poised for stronger growth, driven by a solid recovery, robust manufacturing, and easing inflation.

Potential risks

The ADO also highlights some risks that could slow down Vietnam's growth. These include weak external demand in some major economies, while geopolitical tensions, rising protectionism, and uncertainties related to the US elections in November could fragment trade, negatively impacting exports, production, and employment.

In addition, weak domestic demand and a challenging global economic outlook will add to the uncertainty.

Moreover, the Fed's interest rate cuts, along with similar moves by the European Central Bank (ECB), could also weaken Vietnam's exports.

HSBC has also highlighted several key risks to Vietnam's economy, such as the severe consequences of Typhoon Yagi, sudden fluctuations in global energy and food prices, and the recovery level of global commodity demand, especially in Europe.

The report by UOB Bank indicates that Typhoon Yagi will have a significant impact on various sectors in northern Vietnam, including manufacturing, agriculture, and services, leading to decreased output and damaged infrastructure.

Photo: VNA

Policy recommendations

ADB experts recommend that Vietnam should stimulate domestic demand through stronger fiscal stimulus measures, such as accelerating public investment, while maintaining low interest rates. Policy coordination is necessary to boost economic recovery in a context of relatively stable prices and weak demand.

ADB Chief Economist Nguyen Ba Hung recommends that to maintain growth momentum in 2024 and 2025, ensuring macroeconomic stability with a more balanced combination of monetary and fiscal policies is crucial, along with comprehensive public administration reforms. Weaker-than-expected external demand calls for continued policy measures to stimulate business activities and boost domestic demand.

ADB expert further points out that the State Bank of Vietnam should continue to pursue a flexible monetary policy to facilitate low-cost financing in support of growth.

Shantanu Chakraborty recommends that the government should accelerate public investment disbursement and support policies to boost the economies of localities affected by storms and floods. Public investment disbursement, which is often accelerated at the end of the year, will be a key driver of Vietnam's economy this year.

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