With a GDP growth rate of 5.05 percent, Vietnam failed to obtain the targeted growth rate of 6-6.5 percent. However, economists believe that 5.05 percent is still an encouraging result in the context of high risks in international markets. The figure is high compared with other economies in the world, according to Can Van Luc, chief economist of BIDV and a member of the National Advisory Board for Financial and Monetary Policies.

Particularly, the national economy has shown signs of recovery since the third quarter 2023 and the GDP growth rate increased steadily (3.41 percent in the first quarter, 4.25 percent in second, 5.47 percent in third and 6.72 percent in the fourth quarter).

The driving forces for growth such as exports, investment and consumption have been gradually recovering, though the process is going slowly. The inflation rate was controlled, 3.25 percent on average, while the figure was 5.5 percent in the globe, despite the two-fold money supply increase over 2022. 

The low inflation rate was explained by strict control over supply and prices of essential goods such as gasoline, food and foodstuff, housing products and building materials.

FDI (foreign direct investment) made an impressive recovery with the increase of 32.1 percent in capital, up 3.5 percent, a significant figure if noting that FDI flow worldwide decreased by 2 percent in 2023.

The figures, plus balanced macroeconomic conditions, including import-export, budget receipt and expenditure, labor supply and demand, and the average level of fiscal risks (public debts, foreign debts, budget deficit, sovereign debt obligations) have been praised by international experts. Fitch Rating raised Vietnam’s credit rating to BB+ with ‘stable’ outlook.

Meanwhile, the digital economy, green economy, circular economy and energy transition in Vietnam have been moving ahead, showing positive progress. Vietnam’s digital economy growth rate is predicted to reach 20 percent in 2023-2025, the highest figure in ASEAN, according to Google & Temasek 2023.

However, challenges are still existing. Geopolitical and financial risks, global public and private debts, energy and food security, and climate change all will impact global demand and affect Vietnam’s exports, investment and tourism.

The import-export turnover in 2023 decreased by 6.6 percent, of which exports dropped by 4.4 percent. This was the first time since 2011 that Vietnam saw exports go down. 

The production output for export has begun to recover, but the process has been going slowly with a modest growth rate of 3 percent, the lowest level since 2011.  Budget collections dropped by 5.4 percent, a rarely seen decrease which narrowed the fiscal space.

Businesses are facing difficulties in legal problems, cash flow, higher input costs and administrative procedures. The number of businesses suspending operation and shutting down in 2023 increased by 20.7 percent over the previous year. 

Private investment was relatively low, just increasing by 2.7 percent, while the figures were 2-3 times higher in previous years.

The most noteworthy feature was that growth quality improved with only a modest productivity increase, just 3.65 percent, lower than the 4.8 percent in 2022 and below the targeted 6.5 percent set for 2021-2025. 

The total factory productivity (TFP) contribution to GDP growth was estimated at 44 percent, the same as 2022, lower than the average level of 45.7 percent in 2016-2020 and the targeted 45 percent in 2021-2025.

Luc, while commenting that the government has taken effective measures to fix problems in the corporate bond and real estate markets, and to speed up disbursement of public investments, was cautious when talking about the performance of the economy in 2024.

The world’s economy in 2024 has been predicted as seeing a lower growth rate than 2023, or going flat because the US and Chinese economies are expected to grow more slowly than in 2023, while the European, Japanese and British economies may see better growth, but the growth will be insignificant.

This means that demand for imports, investment and consumption in the world would still be weak despite discovery. Vietnam’s major driving forces for economic growth will still be modest and pre-Covid growth rates won’t be regained in 2024. 

Luc predicted that Vietnam may obtain a 6-6.5 percent growth rate in 2024 and curb  inflation at 3.5-4 percent.

Manh Ha