Vietnam’s best scenario GDP growth not more than 6% this year: minister

Despite ongoing efforts to accelerate public investment disbursement and other measures, Vietnam’s economic growth is unlikely to exceed 6% this year, according to the Ministry of Planning and Investment.

The estimate was presented at a cabinet meeting Saturday by Minister of Planning and Investment Nguyen Chi Dung, who sketched three GDP growth scenarios for the fourth quarter.

In the first scenario where the year's economic growth is about 5%, the economy needs to grow 7% in the last quarter. Corresponding figures for the second scenario are 5.5% and 8.8%.

In the most positive scenario, to reach a growth rate of 6% this year, Dung said the economy must expand by a whopping 10.6%. This was a very challenging task, given that the third quarter GDP growth was just 5.33%.

Economic growth in the fourth quarter depends heavily on the speed of recovery of industrial production, especially processing and manufacturing industries; demand in Vietnam's major export markets; and domestic tourism and consumption at the end of the year and the Lunar New Year festival season, he said.

"The proposed scenarios are very challenging, requiring authorities at all levels, sectors and localities to promote internal resources and take advantage of external opportunities for the highest growth in the fourth quarter, creating momentum for 2024," the minister stressed.

All the scenarios were lower than the target of 6.5% set by the National Assembly and the government earlier this year. Many experts had forecast at the September 19 Vietnam Socio-Economic Forum that Vietnam’s GDP was unlikely to exceed 6% this year with many of the main growth drivers in the first eight months showing signs of slowing down and the economy suffering great external pressures.

Dung noted that production and business enterprises continued to face challenges in terms of markets, cash flow and administrative procedures. These problems have been identified and are being dealt with by the government, but quick improvement was unlikely in the short term.

Vietnam’s exports and imports decreased 8.2% and nearly 14% in the first nine months, respectively. Many key exports were on the decline, such as phones and components (down 13.4%); textiles and garments (down 12%); and footwear (down) 18%. Demand in some major markets like China, Japan, the U.S. and the E.U. improved but many difficulties still lay ahead, the minister said.

Meanwhile, the domestic consumer market was recovering slowly and inventories in the processing and manufacturing industries remained high. Businesses and people still faced barriers in accessing credit. As a result, credit growth in the year to September 21 reached just 5.9%, compared to 10.83% in the same period last year.

Third quarter investment in the non-state sector increased 2.5% over the same period last year, resulting in a total of 2.3% for the first nine months. The decrease in registered capital of newly established enterprises reflected economic difficulties in the short term as well as challenges in promoting output and increasing new production capacity in the medium and long term.

The real estate and corporate bond markets continued to face difficulties, with potential risks. Corporate bond issuance in the year to mid-September plunged more than 60% year-on-year. Meanwhile, the exchange rate pressure was increasing with the U.S. Fed likely to raise interest rates one more time this year.

Amidst many difficulties and challenges, Minister Dung urged agencies at all levels, sectors and localities to take measures to support and remove obstacles for production and business activities, especially with tax, monetary, trade and investment policies.

“It is necessary to mobilize domestic and foreign resources for development investment, perfect the investment attraction mechanism in the context of global minimum tax application (scheduled from January 2024), and prioritize attracting large-scale and high-tech FDI projects,” he said.

At the same time, Vietnam should take full advantage of opportunities and recovery trends of markets to boost exports, provide timely information about the markets and new standards of exporting partner countries, promote export of key products, and better tap export opportunities from the free trade agreements (FTAs).

Vietnam's January-September growth of 4.24% was lower than the same periods from 2011 to 2022, except for 2.19% in 2020 and 1.57% in 2021, according to the General Statistics Office (GSO).

Registered FDI capital rose 7.7% year-on-year to $20.21 billion in the year to September 20, while disbursed capital hit $15.9 billion, up 2.2%.