The Vietnamese economy is expected to grow moderately at 6.5% this year despite global headwinds and further expand at 6.8% in 2024, the highest in Southeast Asia in both years, according to an Asian Development Bank (ADB) report released on Tuesday.
“Vietnam’s economic growth will be constrained in 2023 by the global economic slowdown, continued monetary tightening in advanced economies, and spillover from global geopolitical tensions,” said ADB country director for Vietnam Andrew Jeffries.
“However, Vietnam’s growth support policy with monetary easing, a large amount of public investment to be disbursed in 2023, and the reopening of China will help the country counter these headwinds,” he said.
Vietnam’s economy expanded by 8.02% last year but growth slowed down to 3.32% in the first quarter of this year amid prolonged global headwinds.
The economy will likely confront difficulties in Q2, the Ministry of Planning and Investment told the cabinet’s monthly meeting on Monday, and proposed the government promptly work out measures to reduce taxes and lending interest rates to stir growth.
The State Bank of Vietnam cut its policy interest rates by 0.5 percentage points from Monday, the second cut within one month, to support growth.
According to the Asian Development Outlook (ADO) April 2023 released by ADB Tuesday, the global economic slowdown deepened in Q4/2022 and will likely continue in 2023. Falling global demand is expected to weigh on industrial growth. Agriculture output is expected to grow by 3.2% this year on revived domestic demand and the reopening of China, which accounts for 45% of Vietnam’s export of fruits and vegetables.
The report says public investment in Vietnam will be another key driver for economic recovery and growth in 2023 and 2024, spurring construction and other related economic activities. Along with the move to monetary easing in March 2023, public spending is expected to generate substantial multiplier effects, creating strong growth stimulus for the economy.
The prolonged pandemic exposed structural issues that are among the main downside risks to the Vietnamese economy. Domestic capital markets come under pressure.
The ADB report adds that although the market turbulence has not yet caused serious systemic risks due to banks’ resilience, risks are becoming evident. In the long term, financial sector reforms should be sustained to reduce the dependence of the economy on bank finance and enhance transparency in capital markets.
For Asia, the April study forecasts growth in the developing continent at 4.8% this year and in 2024, up from 4.2% last year. China's recovery and healthy domestic demand in India will be Asia’s main growth supports this year and next. Inflation is forecast to moderate this year and next in Asia, from 4.4% in 2022 to 4.2% in 2023 and 3.3% in 2024, gradually moving closer to pre-pandemic averages.
The World Bank, in its April update, revised its 2023 economic growth forecast for Vietnam down to 6.3% from 6.7%. Meanwhile, Singapore’s United Overseas Bank (UOB) trimmed its 2023 Vietnam forecast down to 6% on Friday, compared with the 6.6% UOB put earlier last week.