The Asian Development Bank (ADB) on Wednesday revised its Vietnam growth forecast down to 5.8% for 2023 and 6.5% for 2024, from 6.5% and 6.8% in April, respectively.
The developing economies in Asia that will grow the fastest in 2023 are India at 6.4%, the Philippines at 6%, and Vietnam at 5.8%, the bank said.
Vietnam’s GDP growth slowed from 6.5% year-on-year in the first half of 2022 to 3.7% in this year’s first half as external demand weakened and growth in manufacturing output braked to only 0.4%, the lowest half-year figure in a dozen years.
In its “Asian Development Outlook” report released on Wednesday, ADB cited this as reason for its forecast revision.
The manufacturing index PMI for the Southeast Asian country has languished below 50 since March 2023 as weaker trade growth closed many businesses, notably in export-driven manufacturing. Industrial production was hit as well by recent power outages in the north and trouble in the real estate sector, the report said.
A credit crunch in response to the corporate bond market and bank exposure to elevated property risk squeezed construction in Vietnam. Meanwhile, recovery in domestic travel boosted consumption, with retail sales up by 11% year-on-year in the first half of 2023.
“In Vietnam, the inflation forecast is trimmed to 4% in 2023 and 2024 on declining global energy prices and stable food supply,” ADB noted.
Growth in Southeast Asia is now expected at 4.6% this year and 4.9% next year, down from 4.7% and 5% previously, due mainly to weaker global demand for exports, it said.
The bank maintained its growth outlook for developing economies in “Developing Asia” in 2023 at 4.8%, driven by “robust domestic demand” and “moderating inflation.”
Developing Asia consists of 46 economies in the Asia-Pacific and excludes Japan, Australia and New Zealand.
“Asia and the Pacific continue to recover from the pandemic at a steady pace,” ADB’s chief economist Albert Park said in the report.
“Domestic demand and services activity are driving growth, while many economies are also benefiting from a strong recovery in tourism,” he added.
Inflation in “Developing Asia” as a whole is expected to stand at 3.6% this year, up from the 4.2% forecast in its previous report in April, while the inflation outlook for 2024 is raised to 3.4% from its earlier estimate of 3.3%.
The reopening of the Chinese economy, which is projected to grow this year at 5%, is boosting the region’s growth despite a slowdown in the demand for Developing Asia’s exports of electronics and other manufactured goods due to monetary tightening to contain inflation, ADB said.
However, the bank marginally lowered the Developing Asia growth forecast for 2024 from 4.8% to 4.7%, as “industrial activity and exports remain weak, and the outlook for global growth and demand next year has worsened.”
Last month, the World Bank cut its Vietnam GDP growth forecast this year to 6% in its June edition of “Global Economic Prospects,” but the figure remained among the highest in Asia, on par with the Philippines. In January, the bank estimated Vietnam’s 2023 GDP growth at 6.3%.