The government’s report presented by Prime Minister Pham Minh Chinh at the National Assembly opening session October 23, 2023 says Vietnam aims for over 5 percent GDP growth this year.
In July 2023, the government agencies vowed to obtain 6.5 percent GDP growth rate for this year.
In early September, the Ministry of Planning and Investment (MPI) put forward three scenarios for GDP growth. In the most ambitious scenario, in order to obtain the 6 percent growth rate for 2023, Vietnam must gain the growth rate of 10.6 percent in the fourth quarter, a rarely seen high growth rate over the last decades.
As such, if Vietnam fails to obtain the 6.5 percent growth rate as targeted, this won’t be a surprise.
The National Assembly Economics Committee’s report reviewing the implementation of the socio-economic development plan says the situation in Vietnam is recovering with next month’s achievements better than the previous month and the indicators of the next quarters higher than the previous ones.
“The macro economy has been stabilized, inflation has been controlled and major balances of the national economy are ensured and the GDP growth has been recovering,” the report reads.
“It is expected that the GDP growth rate will be around 5 percent this year, which is lower than targeted, but still relatively high compared with the region and the world,” it says.
As such, there is a broad consensus between the National Assembly Economics Committee’s and the government’s reports.
The World Bank's October report predicted that Vietnam’s economy would grow by 4.7 percent this year, and the growth rate would be lower than the average growth rate of East Asia - Pacific which is expected to grow by 5 percent.
Vietnam’s growth rate would be lower than Indonesia (5 percent), the Philippines (5.6 percent) and Cambodia (5.5 percent). Vietnam, which has been leading the region in terms of GDP growth rate, is seeing a growth slowdown.
The measurement of real economy
The adjustment of the targeted GDP indicator shows that the national economy is still weak and recovery is still fragile.
The situation of the economy can be seen most clearly in the number of existing businesses. MPI has reported that in the first 10 months of the year, 146,600 businesses left the market, up 20 percent over the same period last year. The figure was even higher than the total number of businesses which were dissolved and went bankrupt in 2022 (143,200).
The situation is the result of purchasing power decrease and unpredictable policies.
The State Audit pointed out that within a short time, the State Bank of Vietnam (SBV) raised operating interest rates twice (September 23, 2022 and October 25, 2022) by 2 percent in total. The move led to a sudden sharp increase in both deposit and lending interest rates in the entire banking system in the last months of the year. The deposit interest rates have reached 11 percent, while lending 13 percent.
The high interest rate increase within a short time has made it impossible for businesses to develop, and the inflation rate is even lower than the level set by the National Assembly.
SBV has four times adjusted the operating interest rates resulting in 0.5-2 percent per annum decrease. However, the average deposit and lending interest rates of transactions made in late August 2023 only decreased by 1 percent compared with late 2022.
“The national economy is thirsty for capital, but it finds it difficult to absorb capital” according to the National Assembly Economics Committee. The outstanding loans had increased by 6.29 percent as of October 11, 2023 compared with late 2022. (the figure was 11.12 percent the same period last year). Meanwhile, the total money supply had increased by 4.75 percent by September 20, 2023, a mild increase, just equal to half of that of the same period last years.
The National Assembly Economics Committee believes that obtaining a growth rate of 6.5-7 percent in 2021-2025, higher than the average growth rate in 2016-2020 (6.25 percent) is a very difficult task.