In the October quarterly update, only three economies in the ASEAN+3 region, encompassing 10 ASEAN countries and China, Japan, and the Republic of Korea (RoK), saw upward revisions. Alongside Vietnam, Japan's 2023 GDP growth was adjusted upward to 1.9% from 1.4%, and Brunei Darussalam rose to 1.1% from 1%.

The overall growth forecast for the ASEAN+3 region in 2023 is 4.3%, down from the 4.6% projection in July. This decline is primarily attributed to weaker-than-expected growth in China during the second quarter. China's economic growth in 2023 is now projected at 5%, down from the 5.5% forecast in the previous report.

AMRO's chief economist, Hoe Ee Khor, noted the significance of China as a major trading partner for the region, affecting not only trade but also tourism and investment. Weaker-than-expected recovery in China may impact imports from the region, particularly concerning intermediate goods used in China's production exported to the US and EU. Khor highlighted the need of the recovery in the US and Europe for China's trade improvement.

Looking ahead to 2024, AMRO anticipates the ASEAN+3 region to expand by 4.5%, expecting the impact of China's policy support measures to fully boost domestic demand. This, coupled with the gradual increase in durable goods consumption in the US and the anticipated recovery of the global technology cycle, is expected to bolster regional exports despite expected weaknesses in the global economy.

Challenges in Vietnam

Despite the upward adjustment in the forecast for Vietnam's 2023 GDP growth, AMRO's projection falls below those of other international organisations such as ADB (5.8%), UOB (5.2%), and Standard Chartered Bank (5.4%). This discrepancy indicates significant challenges for Vietnam in achieving its annual growth target of 6.5% for the current year.

Last week, the Ministry of Planning and Investment presented its latest growth projections for both the fourth quarter and the entirety of 2023. The most optimistic scenario anticipates a 6% economic growth for the entire year, necessitating a 10.6% increase in the fourth quarter. The second scenario envisions a 5.5% economic growth in 2023, with an 8.8% increase required in the fourth quarter. The least favourable scenario involves a 5% growth, demanding a 7% increase in the fourth quarter.

Khor said the Vietnamese Government has taken various measures, using both fiscal and monetary tools, to provide relief to enterprises hit by the downturn by slashing interest rates, deferring tax payments, and restructuring loans.

“It takes a bit longer to recover, but the export sector is very critical and it’s likely to turn around next year. When the demand picks up, enterprises will recover and the economy will grow,” Khor said.

AMRO forecasts that Vietnam's GDP growth in 2024 will attain 6%. Inflation is comfortably within the Government's target, estimated at 3.3% in 2023 and 3.4% in 2024./.VNS