Vietnam has maintained a solid position among emerging nations owing to low public debt, positive GDP in 2021, and stable fiscal scale post-pandemic, according to the Asian Development Bank.
"Vietnam has not required large-scale fiscal intervention post-Covid, which is a common concern in other developing nations," said Andrew Jeffries, ADB Country Director in Vietnam.
Jeffries made the statement at the 4th Vietnam Economic Forum themed “Building an independent and self-reliant economy associated with integration in the new normal stage”, held in Ho Chi Minh City on Sunday.
Vu Thanh Tu Anh, dean of the Fulbright School of Public Policy and Management, also told the forum that Vietnam has maintained stability in a chaotic globe, like a typhoon shelter amid heavy seas.
The world economy declined in 2021, for the first time in 25 years, due to the pandemic. However, Vietnam has maintained a solid macro-economy, unlike what seen amid the world's previous recessions. This demonstrates the economy’s better resistance compared to previous years, Anh added.
"As a neighboring country, we can absorb the shifting investment flows from China. Many investors want to move out of China but remain close to this market," he noted.
Prime Minister Pham Minh Chinh said that the government will continue to prioritize economic reform associated with shifting growth patterns, digital transformation promotion, technical innovation, supply chain diversification, green development, and climate change mitigation.
In particular, he noted at the forum, three segments need to be restructured including investment with fragmented and unfocused public investment, financial markets with many weak credit institutions, and enterprises, with a focus on state-owned corporations.
The PM encouraged foreign investors to expand their investment in Vietnam, engage in high technology, and collaborate with domestic businesses.
However, Associate Professor Dr Tran Dinh Thien, former director of the Vietnam Institute of Economics, argued that "opportunities will also be challenges for a weak open economy."
He cited factors that contribute to Vietnam's unpredictability, including leading nations' economic conflicts and supply chain disruption caused by China's anti-epidemic policy and Western sanctions against Russia.
Jeffries also mentioned China's slowing economy and the U.S. likelihood of recession, both of which are key markets for Vietnam.
There must be a variety of alternate export markets for China or the U.S. Vietnam should climb the global supply chain, focusing on quality rather than quantity to attract high-tech, high-value investment. Higher education and vocational training efforts are also critical, he said.
Jeffries also advocated for maintaining public debt at a manageable level and prudent fiscal management.
As Vietnam is an open economy, it is impossible to completely avoid external shocks. Vietnam benefits more than many other economies in terms of economic integration, thus, don't allow this advantage to slip away, he added.
The IMF forecasts that the Russia-Ukraine conflict would only reduce Vietnam's GDP growth by 0.5% and boost inflation by 0.8%. However, Francois Painchaud, IMF Regional Resident Representative for Vietnam and Laos, recommended the country continue to implement macroeconomic stability measures, associated with institutional reform, data management, and transparency.
The IMF representative recommended strengthening in some of the economy’s aspects, including fiscal management, social security and climate change response, and management of public assets.
Fiscal management; social security and climate change response; and administration of public assets, were also advised by the IMF executive.
"In terms of monetary policy monitoring, it is vital to continue modernizing and strengthening the State Bank's analytical and forecasting capabilities; improve the banking sector by applying Basel II so that it absorbs economic shocks and handles bad debts," said Painchaud.
Credit rating agency S&P Global Ratings in late May revised up Vietnam’s long-term sovereign credit rating to BB+, a "stable" outlook.
Vietnam is one of only two economies in the Asia-Pacific region to have been upgraded since the beginning of the year, the other being Taiwan.
The S&P’s upgrade was based on Vietnam’s steady economic recovery prospects following the progressive lift of domestic and cross-border mobility restrictions, outstanding improvement in vaccination rates, and flexible shift in Covid-control policy.
The agency predicted Vietnam's real GDP growth of 6.9% in 2022, with a long-term trend of 6.5-7% from 2023 onward.