Vietnam urged to extend economic support program into 2024

The Vietnamese government should consider extending the economic support program approved for the 2022-2023 period into 2024 to allow its planned investments to be fully implemented, supporting aggregate demand, the World Bank Vietnam has said in a monthly note.

Amid the economic slowdown, the bank also called for continued vigilance of vulnerabilities in the financial sector and efforts to restore confidence and promote healthy development in the real estate market.

They “will be key to supporting economic stability in the short term and economic growth in the long term,” the bank added.

To deal with unprecedented consequences of the Covid-19 pandemic that dragged down the local economy and hurt the lives of millions of people, the parliament in January 2022 approved a colossal package of monetary and fiscal stimulus that included tax breaks, interest rate reductions, and public investment funds, among others.

Vietnam’s GDP expanded 8.02% in 2022, versus 2.58% in 2021, and is expected to grow 5%-plus this year, falling short of the 6.0-6.5% growth target.

In last month’s note, the WB had suggested Vietnam extend economic support measures into next year as implementation challenges continued to affect the roll out of the investment budget. It called for preparing higher quality projects to help speed up implementation.

In November, the country’s industrial production index grew 2.7% month-on-month (seasonally adjusted-SA). However, prospects remain subdued as Vietnam’s PMI remained in the contractionary territory in November.

Monthly retail sales went down 0.27% month-on-month (SA) in November. Retail sales growth averaged 7.5% year-on-year between August and November, well below the pre-pandemic growth rate of about 12%.

External trade improved in November, with exports and imports of goods up 6.7% and 5.1% year-on-year, respectively. However, cumulative exports and imports for the 11-month period in 2023 were still below the same period in 2022, falling by 5.9% and 10.7% year-on-year, respectively.

Its foreign direct investment (FDI) performance remained steady amid global uncertainties. Registered FDI totaled $28.8 billion between January and November, up 14.8% year-on-year, reflecting investors’ confidence in Vietnam’s economic prospects. However, the figure was still 10% lower than the pre-pandemic level.