ADB revises down Vietnam’s GDP growth forecast to 5.8% in 2023, 6% in 2024

The Asian Development Bank (ADB) has revised down Vietnam’s economic growth forecast to 5.8% in 2023 and 6% in 2024 in its September edition of the Asian Development Outlook (ADO).

The figures were down from 6.5% and 6.8%, respectively, from the April edition.

Vietnam’s projected GDP growth in 2023 is the highest in Southeast Asia, followed by the Philippines with 5.7%, and Cambodia with 5.3%.

The country's anticipated economic expansion in 2024 is among the highest, only behind the Philippines with 6.2% and on a par with Cambodia at 6%.

Overall, Southeast Asia’s growth has been revised down to 4.6% in 2023 and 4.8% in 2024, from 4.7% and 5% respectively.

Regarding inflation, Vietnam’s figures have also been revised down to 3.8% in 2023 and 4% in 2024 from 4.5% and 4.2%, respectively. Vietnam’s 2023 figure is lower than Southeast Asia’s average of 4.2%, but the 2024 figure is higher than the regional average of 3.3%.

Both Vietnam’s projected GDP growth and inflation in 2023 are below the targets of 6.5% and 4.5% set by the National Assembly, the highest legislative body.

Reviewing the financial conditions in Southeast Asia so far this year, the ADB said most central banks had moderated the pace of rate hikes in the first half of this year. However, the State Bank of Vietnam (SBV) was the first to reverse its monetary policy, the ADB stressed, adding that some central banks could begin to make the same move if growth continues to weaken.

In June, the SBV cut its refinance and discount rates by 50 basis points to spur the country’s growth amid prolonged global economic headwinds. From June 19, the refinance rate was cut to 4.5%, the discount rate to 3%, and the overnight electronic interbank rate to 5%. It was the central bank’s fourth policy rate adjustment this year.

However, credit demand in Vietnam remains weak, the ADB stressed. Year-on-year credit growth was 9.3% in the first half of 2023, slower than the 16.8% posted a year earlier. A flexible monetary policy with accommodative policy interest rate changes and a stable foreign exchange rate would help the economy recover, the ADB added.

To support economic recovery, in the near term, monetary policy should be accommodative and fiscal policy expansionary, the ADB recommended, considering relative price stability and weak demand.