Chakraborty said that in terms of monetary policy, the Vietnamese Government has taken effective measures to ensure economic recovery in 2023. Vietnam is one of the first countries to start reducing interest rates while still controlling inflation according to the set target. In particular, the State Bank of Vietnam has cut interest rates four times before June 2023.

Its proactive measures in reducing interest rates, loosening monetary policy contributes to strengthening the economy's resilience in 2023, he said.

In terms of finance, public investment has increased significantly and is one of the main factors promoting economic growth in December 2023. The volume of convention investment reaches about 75% of the assigned plan.

On the fiscal front, the ADB Country Director emphasized the importance of promoting investment in infrastructure and boosting market sentiment as well as creating favorable conditions of doing business. In particular, Vietnam continues to reduce value added tax (VAT) by 2%.

Chakraborty noted that Vietnam did not achieve the economic growth target of 6.5% for 2023, but the results were still impressive. The growth target set for 2023 is not really a fixed number but this is an aspiration the Government has set from the beginning of the year and is a policy goal so the failure to achieve the growth target is due to the fact that Vietnam already faced many challenges in 2023. Most of the challenges came from the decline in economic activities and demand from major trading partners.

Over the past few years, Vietnam's economy has gradually turned export-oriented. According to Chakraborty, based on the latest analysis, export-dependent economies such as Vietnam, Thailand, Malaysia and others have all had their economic growth forecasts downgraded due to the global economic slowdown.

Geopolitical tensions causing disruptions in the global supply chain as well as high interest rates also affect the competitive advantages of Vietnam's products and services. Besides, Vietnam faces domestic challenges such as slow project implementation and large interest rate differences between VND and USD.

"Overall, Vietnam's economy still performed well despite all the unexpected challenges faced during this period," said ADB Country Director.

ADB Country Director for Vietnam Shantanu Chakraborty (Photo: Quang Thuong)

Focusing on domestic consumption to promote economic growth

Although the world economy is entering 2024 with many uncertainties, some countries are witnessing early signs of economic recovery, said Chakraborty.

Economic growth in the United States is showing more positive signs than what ADB predicted. On the other hand, in Europe and Japan there still seems to be no signs of recovery. Increasing geopolitical tensions around the world could negatively impact commodity markets and access to credit. Therefore, the global economy is a mixed picture.

ADB maintains its growth forecast for Vietnam in 2024 at 6%, ranking 2nd in the ASEAN region, owing to the economies of Vietnam's main trading partners growing well, with positive developments in resolving geopolitical tensions.

Also, ADB Country Director stressed that Vietnam will need to ensure its competitive advantage as a "magnet" to attract foreign investment (FDI) in 2024.

Accordingly, Vietnam should continue to maintain its position as a priority country and a favorite destination for foreign investors. It needs to upgrade products and services and move towards products and services with higher added value in the global market.

In addition, there is a need to devise measures to make domestic consumption one of the main growth drivers. Reducing excessive dependence on external demand will help the economy fight against global challenges more effectively.

For example, in 2023, countries with high consumption and domestic demand such as India, China, Indonesia and the Philippines are all countries that have continued to maintain economic growth momentum.

Also, Chakraborty recommends promoting domestic consumption by continuing to implement expansionary monetary policy combined with fiscal policy to put more money in people's hands.

"This is also the time to embark on reforms in many different areas and require additional investment, especially in priority areas," said the ADB Country Director.

Vietnam is a country highly vulnerable to climate change and it is high time to focus on promoting investment in sustainable and resilient infrastructure. He also shared that devising a more coordinated approach between policies will be very important in the future to bring the economy back to the high growth levels that Vietnam has achieved in recent years.

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