Vietnam economy expected to grow 6.5% this year: OECD

Vietnam is likely to achieve GDP growth of 6.5% in 2023 and 6.6% in 2024, according to a report released by OECD on Wednesday.

The Organization for Economic Cooperation and Development prediction for this year is the same as the Vietnamese National Assembly’s target and higher than those by other global organizations, such as the World Bank with 6.3%, IMF with 5.8%, and HSBC with 5.8%

According to the OECD, the country's growth this year can be driven by growth in private consumption (6.3%), private gross fixed investment (6%), net exports’ contribution to GDP growth of 1.1 percentage points, and others. The respective figures for 2024 are 6.4%, 6.3%, and 1 percentage point.

Inflation may rise from 3.2% in 2022 to 4.3% in 2023 and 3.7% in 2024, it said.

The ratio of the government’s gross debt to GDP is predicted to move sideways at 38.8% in 2022, 38.7% in 2023, and 38.2% in 2024. The current account balance can improve from negative 0.9% in 2022 to 0.4% in 2023 and 1.2% in 2024.

As a result, Vietnam’s nominal GDP can increase to $451.7 billion in 2023 and $494.4 billion in 2024 from $410.6 billion in 2022.

The OECD noted factors backing Vietnam’s developments, including pandemic precautions being lifted, foreign investments recovering, stimulus package boosting growth, and China’s updates in Covid-19 policy.

However, some factors weighing down the economy are high prices of energy and food, the prolonged Ukraine-Russia conflict impacting the global chain, disruption in the supply chains, and monetary policy normalization in advanced economies pressuring inflation exchange rates and inflation in Vietnam.

The organization suggested Vietnam continue implementing structural reforms, particularly those to improve the business environment. However, this progress requires significant and ongoing efforts.

Another recommendation is stimulating foreign investment, which accounts for about 20% of the total investment and is more sensitive to general economic conditions. While lauding Vietnam’s efforts, the OECD noted more can be done, such as more involvement of the local authorities in the policy-making process, better coordination between the central and local authorities, improvement to the cross-border movement of foreign laborers, and others.

The organization also recommended Vietnam promote foreign investment in sectors supporting decarbonization, such as renewable energy and transport, by facilitating eco-friendly investments and upgrading domestic environmental standards.

For the country’s digitalization, it noted Vietnam’s digital infrastructure is more developed than Southeast Asian peers but still underdeveloped. "To further promote digitalization, Vietnam should allocate more resources to technical and vocational training to nurture digital skills and talents."

Another task is to ease regulations related to cross-border data flows and strengthen privacy protection and cybersecurity, it added.