Economic momentum softens heading into 2024

In its latest report on global economic prospects released over a week ago, the World Bank predicted that in 2023, lacklustre growth in the global goods trade, which is a key engine of East Asia and Pacific in recent decades, is expected to weigh on activity, particularly in Vietnam where growth is projected to moderate.

Containers at Gemalink International Port in Ba Ria-Vung Tau Province. (Photo: VNA)

The bank has lowered Vietnam’s economic growth for 2023 from 6.3 per cent in its January forecast to 6 per cent this year, 6.2 per cent in 2024, and 6.5 per cent in 2025.

However, these rates are the highest in Southeast Asia, with the growth rate in 2023 being 5.5 per cent for Cambodia, 4.9 per cent for Indonesia, 4.3 per cent for Malaysia, and 3.9 per cent for both Laos and Thailand.

“The Vietnamese economy is facing external headwinds as weakening external demand weighs on exports, translating into weak industrial production. While domestic consumption remains robust, credit growth slowed, reflecting weak credit demand,” the World Bank said in its May bulletin on the Vietnamese economic performance.

According to the Vietnamese General Statistics Office, Vietnam’s index for industrial production (IIP) in the first five months of this year dropped 2 per cent compared to the same period last year, when the IIP climbed 8.1 per cent on-year.

The IIP for the processing and manufacturing sector declined 2.5 per cent against the corresponding period last year, when it rose 8.9 per cent on-year. The electricity production and distribution sector climbed only 0.8 per cent on-year, while the mining sector fell 3.5 per cent on-year, and the water supply, wastewater, and waste management and treatment sector expanded 6.4 per cent.

Spanish global analysts FocusEconomics told VIR that in Vietnam, economic momentum will soften this year due to slower growth in private consumption, fixed investment, and exports.

“That said, stronger fiscal spending would add support, and Vietnam would remain among ASEAN’s top performers,” FocusEconomics said. “Foreign exchange fluctuations, monetary policy, relations with the US, and the impact of China’s recovery on exports are key factors to watch.”

The analysts forecast Vietnam’s GDP to expand to 5.4 per cent in 2023, down by 0.3 percentage points from the firm’s forecast made one month ago, and increase to 6.5 per cent in 2024.

After sliding 11.2 per cent on-year in April, industrial output rose 0.1 per cent on-year in May. This still signals a worsening trend in the industrial sector.

FocusEconomics sees industrial production expanding 5 per cent in 2023, down by 2.5 percentage points from one month ago, and climbing to 8.8 per cent in 2024.

Prompted by economic woes, the International Monetary Fund has also lowered its projection for Vietnam’s growth from 6.2 per cent in January to 5.8 per cent for this year and 6.9 per cent for next year. Despite the revision, this will still be among the highest in the emerging and developing Asia group of 30 economies.

At the National Assembly, Minister of Planning and Investment Nguyen Chi Dung said, “The crucial thing for enterprises is that they must have orders as soon as possible because orders will help them boost production and business activities. However, they are facing numerous burdensome administrative procedures. Many businesses are lamenting that such procedures in many localities are very slow as state cadres don’t want to work, and instead shirk responsibility.”

According to the World Bank, one of the biggest drivers for economic growth in Vietnam is to boost public investment.

“Acceleration of public investment disbursement could support aggregate demand and economic growth in the short run while ensuring investments in human capital and resilient and green infrastructure will bolster long term economic development,” the bank said

Vietnam’s GDP grew 8.02 per cent last year, the highest in 10 years, while total per capita income hit $4,110.

ASEAN, Eurasian Economic Union hold business dialogue A business dialogue between ASEAN and the Eurasian Economic Union (EAEU) was held on June 15 in the framework of the 26th St. Petersburg International Economic Forum (SPIEF) in Russia.

Public investment deemed key driver for economic growth and inflation control Rebounds in retail and consumption services and in the disbursement of public investment are expected to put pressure on the country’s efforts to bring inflation under control this year.