Vietnam GDP growth to rebound next year after 2023 slowdown: WB

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.

The WB’s assessment is contained in its “Taking Stock August 2023: Making Public Investment Work for Growth” report released Wednesday.

The report highlights risks for the economy, including weaker-than-expected global demand; further tightening of global financial conditions, which emphasizes different stances in monetary policy of Vietnam and developed countries; global climate change; and possible power shortages.

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

The bank also estimates Vietnam’s consumer price index (CPI), an indicator of inflation, to grow from 3.1% in 2022 to 3.5% in 2023, but fall to 3% in 2024 and 3% in 2025.

The higher rate in 2023 is attributed to a 12.5-20.8% increase in retirement pension outweighing the VAT rate cut from 10% to 8%.

The CPI in Vietnam increased by 3.12% year-on-year in the first seven months, according to the General Statistics Office.

The WB report also highlights the country’s public debt management, which fell from 41.3% of GDP in 2020 to 39.3% in 2021, 35.7% in 2022, and could reach 36% in 2023, 35.2% in 2024 and 34.4% in 2025.

It notes that Vietnam’s figure in 2022 was lower than regional peers like Indonesia with 40.9%, the Philippines with 60.9% and Thailand with 60.9%. This achievement can help Vietnam continue further countercyclical fiscal policy without compromising debt sustainability, the report says.

It says the disbursement of foreign direct investment (FDI) disbursement in Vietnam remained resilient in the first half of 2023 despite declining commitments. As global uncertainties continued to weigh on investor confidence, registered FDI capital in H1/2023 reached $13.4 billion, 4.5% lower year-on-year. Meanwhile, FDI disbursement reached $10 billion in the period, unchanged from the same period in 2022.

The report identifies several challenges for Vietnam in attracting more FDI bank. The nation’s underdeveloped infrastructure, with a score of 65.9 in the Global Competitiveness Index 2019 report, is below regional competitors like India, Indonesia, Malaysia, Thailand and China. The infrastructure investment gap will constrain Vietnam’s ability to attract and retain FDI, including those looking to relocate from China, the report cautions.

It further says that continued uncertainties in the global financial market have the potential to rekindle stress in the global banking sector, intensify investor risk aversion and discourage FDI flows to Vietnam.

In a recent release, World Economics, a global data analyzer, reported that Vietnam's GDP would reach $2,848 billion in 2030 per purchasing power parity (PPP) calculation, up 85.5% year-on-year.

With such a performance, Vietnam can surpass Thailand to become the second-biggest economy in Southeast Asia, only behind Indonesia, the release said.