Pressure to achieve GDP growth of 6.5 per cent

August 09, 2023 | 11:44
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Amidst the challenges in the US and EU markets, and a slower than expected recovery in China, Vietnam is facing more pressure to drive growth in the domestic market over the remainder of the year.
Pressure to achieve GDP growth of 6.5 per cent

Prime Minister Pham Minh Chinh refrained from changing the 2023 GDP growth target of 6.5 per cent at the end of the regular government meeting. He requested that government members remove obstacles for production and business activities to achieve a growth rate of 9 per cent over the last months of the year.

To facilitate the goal, PM Chinh emphasised the top priority of removing bottlenecks in the system, promoting growth, and creating jobs, thereby contributing to maintaining macroeconomic stability and controlling inflation.

The PM stipulated a review of policies to put forward concrete and appropriate solutions to stimulate the three growth drivers of investment, export, and consumption.

The nation's current GDP growth has not met expectations, only reaching 3.72 per cent over the first six months of the year. Most economic analysts attributed the slow progress to the headwinds in the global economy.

Nguyen Quoc Viet, deputy director of the Institute for Economic and Policy Research said, "It is unlikely that GDP will reach 6.5 per cent this year. It is difficult to make a breakthrough in the current economic situation."

International organisations are not upbeat about the outlook of the Vietnamese economy. In late July, the Asian Development Bank lowered its growth forecast for 2023 from 6.5 per cent to 5.8 per cent, and from 6.8 per cent to 6.2 per cent for 2024.

Previously, in June, the World Bank also lowered its forecast to 6 per cent from the 6.3 per cent announced in January. Vietnam's economic growth is expected to rebound to 6.5 per cent in 2024.

Viet noted that a growth rate of 6.5 per cent is possible if the global economy experiences positive developments and China's economic opening really creates a boost for the global economy. Vietnam's major trade and investment partners have recovered their economies as their policies have quickly taken effect.

"However, this is very unlikely to happen given that over the past 5 years, the country only achieved a growth rate of 8.2 per cent in the fourth quarter of 2017," he said.

"If geopolitical conflicts around the world become more complicated, it will not only hinder Vietnam's economic growth in the remaining months of 2023 but also have adverse effects going forward," Viet added.

Vietnam's National Center for Socioeconomic Information and Forecasts anticipates that the nation's GDP growth rate will reach about 7 per cent per year over the 2021-2025 period.

Vo Tri Thanh, director of the Institute for Brand Strategy and Competition stated, "A growth rate of over 5 per cent takes a lot of effort. We are implementing legal amendments, supporting the financial market, and restructuring the real estate market. However, the results are still limited."

Thanh further noted that the economy is facing tremendous challenges, both internally and externally. In 2022, Vietnam's economic growth reached 8 per cent, mainly driven by consumption, exports, and overseas funding. However, in 2023, these factors will remain limited.

According to the General Statistics Office, the export turnover of goods in the first seven months of 2023 decreased by 10.6 per cent on-year, reaching only $194.7 billion.

The domestic economic sector earned $51.5 billion, down 10.2 per cent and accounting for 26.4 per cent of the total. Meanwhile, the foreign direct investment sector (including crude oil) generated $143.2 billion, falling by 10.8 per cent and making up 73.6 per cent.

Thanh stressed that the growth target of 6.5 per cent for 2023 is very challenging. It will depend on a combination of unpredictable developments around the world and the country's efforts.

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By Hai Van

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