Vietnam central bank unlikely to further loosen monetary policy: WB

The slow credit growth and close monitoring of the inflation amid higher global energy prices may prevent the State Bank of Vietnam from loosening the monetary policy further, the World Bank said.

In its August edition of the Vietnam Macro Monitoring report, the WB clarified the credit growth rose from 9% year-on-year in July to 9.4% in August, well below the levels in the same period of previous years and below the target of 14% for the whole 2023. This slow growth indicated investors’ weak confidence and weak private domestic investment, especially in the real estate sector.

The WB also highlighted that the continuation of tight global financial conditions warrants flexible foreign exchange (FX) management to accommodate external conditions.

Additionally, the more acceleration of public investment disbursement could support the aggregate demand and economic growth in the short run, while focus on priority green and resilient infrastructure and human capital investment will bolster long-term economic development, the bank noted.

Reviewing the economic performance, the WB said the foreign direct investment (FDI) inflows in Vietnam remained steady, reflecting continued foreign investors’ interest in business opportunities in Vietnam despite global uncertainties.

Registered foreign direct investment capital in Vietnam rose 8.2% year-on-year to nearly $18.15 billion in the year to August 20. Disbursed FDI capital inched up 1.3% to $13.1 billion in the eight-month period.

Vietnam’s GDP growth may slow down to 4.7% this year from 8% in 2022, but it’s likely to rebound to 5.5% in 2024 and 6% in 2025, the World Bank says in its “Taking Stock August 2023: Making Public Investment Work for Growth” report released last month.

The latest figure is lower than the WB's June projection of 6%. The 4.7% figure is also worse than the forecasts of ADB in July (5.8%), HSBC in June (5%), and the S&P Global Ratings in June (6%).

The WB's latest figure is on par with the IMF's anticipation of 4.7% and the ASEAN+3 Macroeconomic Research Office's (AMRO) figure of 4.4%.