Vietnam economy confronts 'headwinds' and 'whirlwinds': expert

By Huong Dung
Wed, July 26, 2023 | 3:12 pm GMT+7

The Vietnamese economy is facing two external ‘headwinds’ and two internal ‘whirlwinds’, said Vo Tri Thanh, director of the Institute for Brand and Competitiveness Strategy (BCSI).

At a seminar in Hanoi on Tuesday to find ways to increase businesses’ capital absorption, Thanh said that the difficulties faced by the economy have been coming to light since the third quarter of 2022.

International organizations are expressing less optimism about economic growth around the world and in Vietnam, he said, noting the country’s 6% GDP growth target for 2023 poses a challenge.

The first headwind faced by Vietnam is the global economic slowdown, especially among its main partners. “Now, will this gloomy outlook worsen or improve, or will a global recovery and that of China be fast or slow?" Thanh said.

The second headwind is the strict financial and monetary conditions globally. Monetary and fiscal policies have never been more stressful than in recent times. However, there is a high probability that this tension will ease if inflation begins to fall faster than expected (U.S. inflation is now around 3%).

Vo Tri Thanh, director of the Institute for Brand and Competitiveness Strategy (BCSI). Photo by The Investor/Trong Hieu.

Vo Tri Thanh, director of the Institute for Brand and Competitiveness Strategy (BCSI). Photo by The Investor/Trong Hieu.

Domestically, according to Thanh, Vietnam is encountering two whirlwinds. The first is the financial issue. Since the end of last year, the financial market has faced the pressure of high interest and exchange rates, and inflation; liquidity shortages both in the banking system and the market; and plunging stock and corporate bond markets, along with the stagnant real estate market, resulting in a serious drop in market confidence.

"In the past six months, with the efforts of the regulators and a little luck from the outside, banking liquidity has become abundant again, with overnight interest rates nearing 0%. However, the restructuring of property businesses has seen limited results," Thanh said.

The second whirlwind is the economic difficulties caused by rapidly decelerating imports and exports. "This is a very serious issue as import-export turnover accounts for such a large proportion of GDP in Vietnam," he noted.

Sharing the same view, Deputy Governor of the State Bank of Vietnam Dao Minh Tu said that it has never been so difficult for the central bank to manage monetary policy.

In the first half of 2023, the world economy continued to witness rapid and unpredictable fluctuations, with difficulties in global production and trade; increasingly fierce strategic competition and geopolitical conflicts between major countries; high inflation and interest rates, and tightened monetary policy.

Domestically, economic growth was lower than the scenario set in the context of a decrease in aggregate global demand and internal difficulties facing the economy. Vietnam's traditional large import/export markets have faced hurdles since the Covid-19 pandemic, while resilience has been eroded and inflation has caused many potential risks.

"These developments have led to a slow global recovery, directly affecting enterprises’ ability to absorb capital," said the deputy governor.

According to Nguyen Van Than, chairman of the Association of Small and Medium Enterprises (ASME), local enterprises, especially SMEs, are struggling.

In the first six months of 2023, 113,600 enterprises were set up and resumed operations, down 2.9% over the same period last year. Meanwhile, the number of companies temporarily suspending business activities was 100,000, up 18.2% year-on-year.

A survey by the General Statistics Office shows that only 18.5-28.9% of enterprises operating in the fields of export, processing and manufacturing said their production and business situation in the second quarter was better than in the first quarter; 36.2-43.2% said the situation was stable, and 27.4-36.2% reported a decline.

"This clearly shows the difficulties surrounding businesses, especially SMEs, as domestic consumption and export orders have both dropped sharply," Than said.

In addition, up to 25% of the association’s members said they are facing difficulties accessing credit due to strict lending criteria, he said, adding that many exporters also proposed reducing loan interest rates for U.S. dollars to increase international competitiveness, helping businesses survive before the market shows signs of a recovery in the third quarter of 2023.

The ASME representative proposed the government create conditions for SMEs to restructure production for stable and long-term development, including allowing them to participate in 30% of public investment projects.

It is necessary to restructure credit guarantee funds and strengthen the role of local management agencies to deliver credit ratings for enterprises to guarantee loans, he said.

Echoing Than, Nguyen Quoc Hung, general secretary of the Vietnam Bankers Association, said that currently there are about 24 SME credit guarantee funds in cities and provinces, but they are mostly inactive or inefficient.

“Therefore, it is necessary to improve the role and responsibilities of SME credit guarantee funds, considering this an important solution to supporting and developing SMEs in each locality,” he noted.

Comments (0)
  • Read More
Vietnam’s benchmark VN-Index to reach 1,400-1,420 points in 2025: broker

Vietnam’s benchmark VN-Index to reach 1,400-1,420 points in 2025: broker

The VN-Index, representing the Ho Chi Minh Stock Exchange (HoSE), may hit 1,400-1,420 points in 2025, driven by an 18% market-wide profit growth and a price-to-earnings (P/E) ratio of 12.5-13x, according to broker MBBank Securities (MBS).

Finance - Sun, December 22, 2024 | 7:52 pm GMT+7

HCMC's first metro line officially operational after nearly 2 decades

HCMC's first metro line officially operational after nearly 2 decades

The first urban railway line in Ho Chi Minh City, named Ben Thanh-Suoi Tien, officially started commercial operations on Sunday after nearly two decades of waiting.

Infrastructure - Sun, December 22, 2024 | 2:17 pm GMT+7

Vietnam's 2025 GDP to grow 6.5% on robust infrastructure investment, consumer spending recovery: VinaCapital

Vietnam's 2025 GDP to grow 6.5% on robust infrastructure investment, consumer spending recovery: VinaCapital

Domestic factors, including a ramp-up in Government infrastructure spending, a revival of the real estate market, and a recovery of consumer spending, will help sustain Vietnam's GDP growth at a circa 6.5% pace next year, in-line with the National Assembly’s official target and with 2024 GDP growth, write Michael Kokalari, chief economist at VinaCapital.

Consulting - Sun, December 22, 2024 | 2:00 pm GMT+7

Vietnam shipping, seaport stock rally driven by rosy outlook in 2025

Vietnam shipping, seaport stock rally driven by rosy outlook in 2025

Many shipping and port stocks have risen sharply since November on an optimistic outlook for the industry driven by increasing throughput and a shift in container shipping alliances in 2025.

Companies - Sun, December 22, 2024 | 10:00 am GMT+7

Singapore’s Platinum Victory seeks to raise stake in Vietnam’s REE to nearly 45%

Singapore’s Platinum Victory seeks to raise stake in Vietnam’s REE to nearly 45%

Singaporean fund Platinum Victory Pte. Ltd. has registered to buy another 16.8 million shares in Ho Chi Minh City-based utility firm Refrigeration Electrical Engineering Corporation (REE), aiming to increase its ownership to nearly 45%.

Finance - Sun, December 22, 2024 | 9:29 am GMT+7

1.8 km road connecting Lach Huyen Port terminals to be built in northern Vietnam

1.8 km road connecting Lach Huyen Port terminals to be built in northern Vietnam

The Hai Phong Economic Zone Management Board has taken a significant step forward in enhancing infrastructure around Lach Huyen Port by establishing a council to appraise the environmental impact assessment for the road connecting terminals No. 3 to No. 6.

Economy - Sun, December 22, 2024 | 8:00 am GMT+7

Hanoi TikToker internationally wanted for involving in multi-billion-dollar scam

Hanoi TikToker internationally wanted for involving in multi-billion-dollar scam

Hanoi police have issued an international arrest warrant for Le Khac Ngo, known as "Mr. Hunter," a key accomplice in a recently-dismantled massive foreign exchange and securities fraud ring.

Society - Sat, December 21, 2024 | 10:57 pm GMT+7

Unlocking Phu Quoc’s potential to become the 'Hawaii of the East'

Unlocking Phu Quoc’s potential to become the 'Hawaii of the East'

Leading global tourism companies have remarked that Phu Quoc has "yet to receive the recognition it deserves," despite its impressive and unexpected growth rate.

Travel - Sat, December 21, 2024 | 7:20 pm GMT+7

Thai central bank maintains policy interest rate at 2.25%

Thai central bank maintains policy interest rate at 2.25%

The Thai Chamber of Commerce (TCC) has said it backs the decision by the Bank of Thailand, the country's central bank, to maintain the policy interest rate at 2.25%, considering the move as suitable for a reviving economy.

Southeast Asia - Sat, December 21, 2024 | 5:43 pm GMT+7

Vietnam's military-run tech giant Viettel strikes big deals at international defence expo

Vietnam's military-run tech giant Viettel strikes big deals at international defence expo

Subsidiaries of Military Industry and Telecommunications Group (Viettel) signed a string of significant contracts with major global partners during the first two days of the Vietnam International Defence Expo 2024 in Hanoi.

Companies - Sat, December 21, 2024 | 5:36 pm GMT+7

Taiwan’s Wistron acquires 37ha land lot in northern Vietnam for expansion

Taiwan’s Wistron acquires 37ha land lot in northern Vietnam for expansion

Taiwan-headquartered Wistron, a top electronics provider and an Apple supplier, will further its investment in Vietnam’s northern province of Ha Nam by acquiring another 37.1-hectare land lot.

Companies - Sat, December 21, 2024 | 2:08 pm GMT+7

VAFIE seeks to promote sci-tech development, intellectual property policies

VAFIE seeks to promote sci-tech development, intellectual property policies

The Vietnam’s Association of Foreign Invested Enterprises (VAFIE) aims to enhance policies for the development of science, technology, and intellectual property, creating a more conducive investment environment.

Companies - Sat, December 21, 2024 | 1:59 pm GMT+7

Vietnamese dong likely to depreciate 3% in 2025: VinaCapital

Vietnamese dong likely to depreciate 3% in 2025: VinaCapital

The Vietnamese dong is likely to depreciate 3% in 2025 on anticipation that the US Dollar/DXY Index will finish 2025 nearly unchanged, says Michael Kokalari, chief economist at Vietnam's leading fund manager VinaCapital.

Economy - Sat, December 21, 2024 | 11:23 am GMT+7

First luxury railway journey across Vietnam features Indochine architecture

First luxury railway journey across Vietnam features Indochine architecture

PYS Travel has launched the first luxury railway journey across Vietnam named Sjourney, marking a new milestone in the railway tourism sector.

Travel - Sat, December 21, 2024 | 10:09 am GMT+7

Vietnam among 40 most beautiful countries: US publication

Vietnam among 40 most beautiful countries: US publication

Vietnam has secured the 36th position in the ranking of the 40 most beautiful countries in 2024 in a testament to its undeniable charm and appeal, according to US News & World Report.

Travel - Sat, December 21, 2024 | 10:04 am GMT+7

Foxconn to invest $16 mln more in Vietnam’s Quang Ninh province

Foxconn to invest $16 mln more in Vietnam’s Quang Ninh province

Competition Team Technology (Vietnam) Company Limited, a subsidiary of Foxconn, will invest an extra $16 million in its “S- Vietnam” project in the northern coastal province of Quang Ninh.

Industries - Sat, December 21, 2024 | 9:53 am GMT+7