ADB forecasts Vietnam's economic growth in 2023 to reach 5.8%

At the ADB press conference on the morning of September 27, updating the economic situation in Vietnam, Mr. Shantanu Chakraborty, ADB Country Director in Vietnam, assessed that 2023 is a challenging year for the Vietnamese economy.

Still, the economy remains resilient, buoyed by strong domestic consumption supported by moderate inflation.

ADB revised its full-year economic growth forecast for 2023 down to 5.8% from its previous forecast of 6.5%, reflecting weaker global demand than before.

Asian Development Bank (ADB) press conference on the morning of September 27.

Growth in 2024 is forecast to reach 6% as the economy continues to be affected by the global economic downturn, monetary tightening in major economies and ongoing geopolitical uncertainty. Inflation is also forecast to decline, possibly to 3.8% in 2023 and 4% in 2024.

According to ADB, the main factors affecting Vietnam's economic growth rate mainly come from outside. These are the global economic recession, monetary tightening in some developed countries and the impact of the ongoing Russia-Ukraine war.

For example, the most obvious impact from the decrease in global market demand has affected the manufacturing and processing industry in Vietnam, reducing the forecasts of related industries.

The report also highlights risk factors that could impact Vietnam’s economic growth forecast in the coming time. Domestically, slow disbursement of public investment capital and structural weaknesses within the economy are the main risks leading to a slowdown in growth.

Externally, a significant slowdown in global growth and a weak recovery in China remain risks to the economic outlook. Remaining high interest rates in the US and Europe, coupled with a stronger US dollar, could further complicate the recovery in external demand, leading to a depreciation of the VND.

However, the report also mentioned the growth prospects of some economic sectors in the coming period. Specifically, the service sector is expected to continue to expand thanks to the revival of the tourism industry and the recovery of related services. Agriculture will benefit from rising food prices, and is expected to grow by 3.2% in 2023 and the following year.

“ Policy coordination can help the recovery take place effectively, given the relatively stable price environment and weak demand. In the short term, accommodative monetary policy and expansionary fiscal policy are needed. Slow credit growth suggests that monetary policy easing must be closely coordinated with fiscal policy implementation to effectively boost economic activity. Bank credit growth is expected to slow due to an increase in gross non-performing loans, estimated at 5.0% by March 2023, and correspondingly higher provisioning requirements ,” the ADB report recommended.

Regarding import and export forecasts, ADB said that weakening global demand will negatively impact trade prospects in the remaining months of 2023 and 2024. However, exports in August 2023 showed signs of recovery when they increased by 7.7% compared to the previous month.

Export and import growth is expected to return to a modest 5.0% this year and next, supported by a recovery in global demand. Strong trade activity will help maintain a current account surplus this year, estimated at around 3% of GDP. As manufacturing activity recovers and imports of inputs for production increase, the current account balance is expected to decline to 2% of GDP by 2024.

Chau Anh

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