Sustaining economic recovery and prospects for growth in 2023

Dang Xuan Quang, deputy director general of NCIF under the MPI

In 2022, Vietnam outperformed other countries in the region following a rebound in consumer spending, several quarters of robust export growth, and the gradual return of international tourism.

GDP growth in the third quarter of 2022 exceeded all forecasts, estimated to increase by 13.67 per cent on-year, bringing GDP growth in the first nine months of 2022 to 8.83 per cent.

Inflation was still below the annual target (4 per cent per year). However, a global slowdown and heightened risks of financial instability could weigh on growth in 2023 and 2024.

This was the focus of the 2^nd Vietnam Economic Pulse forum, which took place in Hanoi today (November 22) on the topic: “Extending Economic Recovery – Growth Drivers” with the participation of government officials, development partners, business leaders, and scholars.

The forum was jointly organised by the National Center for Socio-Economic Information and Forecasting, under the Ministry of Planning and Investment (NCIF-MPI) and the UN Development Program (UNDP), to analyse and assess the economic recovery process after the COVID-19 pandemic and policies sustain growth and development in the coming year.

Dang Xuan Quang, deputy director general of the NCIF, said: “Through this forum, the MPI and UNDP have got more useful information and proposed policy solutions, which serve as the basis for supplementing and refining the system of policy solutions for economic recovery and development of Vietnam in the future."

According to UNDP resident representative Ramla Khalidi, Vietnam has bright economic prospects, but risks are multiplying.

“Evidence of a strong recovery is welcome news after two years of economic disruption caused by the pandemic. Vietnamese households will enter the Year of the Cat in 2023 in better financial shape than a year ago,” she said.

The risks to sustaining the recovery are mostly external. War in Ukraine, the economic slowdown in China, rising international interest rates, a strengthening dollar, and the growing risk of recession in Europe could affect demand for Vietnam’s exports and increase the risks of macroeconomic instability. Policymakers must remain vigilant, adjusting fiscal and monetary policy promptly as global conditions evolve.

There are also domestic risks, especially in the banking and bond markets, which are sensitive to rapidly changing conditions in the property sector. The negative impact of climate change will increasingly weigh on agricultural production and the health and well-being of communities affected by sea level rises, flooding, drought, and intensive storms.

Sustaining economic recovery and prospects for growth in 2023

At the forum, Francois Painchaud​, IMF resident representative for ​Vietnam and Lao P.D.R., presented the report “Global Economic Outlook: ​ Sailing into the headwinds​.”

He said that with strong growth through September, the GDP growth forecast for Vietnam in 2022 would be from 6 to 7.5 per cent. However, due to slowing external demand and tighter financial conditions, the growth forecast for 2023 is 5.8 per cent. Inflation is expected to rise, before gradually returning below 4 per cent.

In his opinion, policies must be carefully calibrated, coordinated, and communicated; the State Bank of Vietnam should focus squarely on inflation​; safeguard financial stability​; flexible fiscal policy; and structural reform.

Nguyen Quang Thuan, CEO of FiinGroup shared policy recommendations:

(i) for short-term/ immediate actions: introducing selected liquidity facilities, including a special review on major issuers with large exposure to individual bondholders, real estate credit program, stimulating the public offering bonds, stronger messages from the government to restore debt market confidence;

(ii) for the medium-term:accomplishing the planned activities, including enhancing information transparency, launching a centralised secondary market by June 2023 as required under Decree 65, market education, expanding investor base, and green credits.

A year ago, the UNDP and MPI launched Vietnam Economic Pulse to create a channel to engage government officials, academic institutions, the business community, and civil society in debates concerning economic affairs and socioeconomic development policy.

Vietnam to post strong recovery amid external headwinds Amid external headwinds, Vietnam’s GDP growth is expected to rebound to 7 per cent in 2022 on the back of strong external demand, a recovery in domestic demand, and strong FDI inflows.

Acceleration sought for socioeconomic recovery The national Plan on Socioeconomic Development next year may not reach its desired growth goal if risks continue lingering and the country’s hallmark scheme on recovery keeps its existing slow pace in implementation.