Vietnam economy on upward trend with inflation controlled, currency stable

Vietnam's economy is well on track to recovery and continued growth in 2023 following its success in controlling inflation and maintaining the relative stability of the Vietnamese dong last year, corporate representatives told the Vietnam Business Forum (VBF) on Sunday.

Those successes are remarkable in comparison with other countries in the region, Gregory Testerman, chairman of AmCham Vietnam in Ho Chi Minh City, told the forum in Hanoi which was attended by Prime Minister Pham Minh Chinh.

"Productivity gains in its manufacturing base and the return of international transport costs to pre-Covid levels bode well for continued growth in Vietnam’s export capacity this year. The country’s modest debt-to-GDP ratio will offer room to maneuver in its eventual response to the next downturn in the global economy," he said.

However, Testerman noted that reduced consumer demand in the U.S. and the E.U. have already created a backlog of inventories, resulting in decreasing factory orders. This reduced international demand, coupled with reduced domestic demand in Vietnam, is likely to result in slower GDP growth for Vietnam in 2023.

"This reduction should be offset, at least partially, by supply-side gains resulting from expected robust FDI inflows that will support Vietnam’s ambitious plan for $30 billion in new infrastructure spending during the year."

Gabor Fluit, newly-elected chairman of the European Chamber of Commerce in Vietnam (EuroCham), said even with 2022’s global commodity price spikes, inflation and supply chain disruptions, Vietnam stands tall as one of the world's top growth economies.

"Vietnam is now well-positioned to show the world its potential as a global leader in sustainable economic development," he said.

With last year’s 8.02% expansion, the highest in 12 years, Vietnam was one of Asia’s fastest-growing economies.

However, the high growth rate in 2022 was partly derived from the low growth base in the pandemic years of 2020-2021, at 2.91% and 2.58% respectively.

The World Bank on March 13 said Vietnam’s economic expansion might ease to 6.3% in 2023 from a robust 8% last year, reflecting domestic and external headwinds.

"Vietnam has the fiscal space to implement measures to boost growth, unlike many other countries. Effective implementation of priority public investments is key to support growth, both in the short-term and in the longer term," said Carolyn Turk, World Bank country director for Vietnam.

The AmCham chairman, however, noted that its members are concerned about growing administrative burdens and slow decision making.

"We see conflicting regulatory procedures particularly regarding definitions of what is a foreign enterprise or FIE, and what is a local or domestic company," said Testerman.

Ministries are making conflicting determinations. The same company can be treated as a foreign company under pharmaceutical regulations – and therefore exempt from distribution rights – and treated as a domestic company under the cyber law, he explained.

EuroCham's latest survey for the last quarter of 2022 shows that the most important factor that Vietnam needs to improve to attract FDI is administrative procedures. The second is to enhance the quality of infrastructure. The third is to minimize difficulties and create favorable conditions for foreigners to enter and live in Vietnam.

The EuroCham chairman told the VBF that current work permit procedures should be streamlined.

"It's simply not right that people who have been living, working, and investing in Vietnam for years, with multiple successful work permits, are now being denied permit renewals for minor procedural issues. To unleash the potential of our diverse and talented workforce, we must simplify bureaucratic hurdles and clear the path to success," said Fluit.

"Visa exemptions of one-month should be extended to all EU countries and other major tourist sources. Moreover, implementing a specialized visa program tailored for self-supporting retirees for three-to-six months has the potential to catalyze the growth of a thriving tourism sector, mirroring the success of our neighboring countries," he added.