Three scenarios, four economic growth opportunities in 2023

On June 22, in Hanoi, the Workshop to announce the Vietnam Economic Annual Report 2023: Linking and developing enterprises towards a self-reliant economy was held.

Overview of the workshop

The biggest message of this year’s report is that the economy’s autonomy is not high. When indicators ensuring sustainable growth and business competitiveness are declining in the context of unfavorable international economic factors, along with internal economic problems that are not thoroughly handled, when difficulties arise, the ability to adapt is not high. Therefore, it is necessary to strengthen connectivity and focus on solutions to develop businesses in a substantial and sustainable manner.

In 2022, the COVID pandemic has not yet been truly controlled in the world, combined with the wave of rising interest rates and unpredictable political fluctuations, which have seriously affected the production and business activities of enterprises and Vietnam's growth drivers.

According to the Vietnam Economic Annual Report 2023, the Vietnamese economy has been showing some problems. The industrial and construction sector has slowed down sharply since the third quarter of 2022 and in the first 5 months of 2023, the industrial production index (IIP) is estimated to decrease by 2% compared to the same period last year.

Inflation in Vietnam remains high despite cooling down due to pressure from global inflation and rising input prices. In the first 5 months of 2023, the consumer price index (CPI) also increased by 3.55% compared to the same period in 2022. According to the report, the core inflation increased by 4.54%, which is the unknown factor for Vietnam's macroeconomic stability management in the remaining period of 2023.

At the same time, the exchange rate in Vietnam has fluctuated strongly since the end of the third quarter of 2022, peaking in November 2022. Importing enterprises have expanded their USD foreign exchange reserves to hedge against future exchange rate risks, while exporting enterprises have increased their foreign currency holdings in anticipation of opportunities to sell at higher prices. The State's foreign exchange reserves have also shown signs of a sharp decline.

However, the exchange rate between the USD and VND in early 2023 stabilized again due to the US Federal Reserve (Fed) slowing down the rate of interest rate increases and sustained inflation in the US, causing the USD to depreciate sharply in the domestic and international markets.

In addition, the burden of interest on businesses, the Russia-Ukraine conflict and Vietnam's exports heavily dependent on foreign direct investment (FDI) enterprises are also challenges for the economy in the rest of this year.

Commenting on Vietnam's current economy, Prof. Dr. Andreas Stoffers, Country Director of FNF in Vietnam, said that Vietnam has experienced unprecedented economic growth. According to the latest report of the Heritage Foundation, Vietnam is now one of the economically free countries.

According to Prof. Dr. Andreas Stoffers, Vietnam's economic growth rate is also impressive. He emphasized: "Next to Poland, Vietnam is the country that has grown the fastest in recent years and this trend has not ended. The reason is that this country has not deviated from its basic values ​​during the crisis caused by Covid-19".

The measures to combat Covid-19 have caused a major crisis worldwide and disrupted global supply chains and value chains. As a country with high international economic integration, FNF's Country Director in Vietnam said that this is a difficult time for Vietnam.

3 GDP growth scenarios in 2023. In the low scenario, Vietnam's GDP growth rate in 2023 will only reach 5.5%. In the baseline scenario, the GDP growth rate will be 6%. In the high scenario, the GDP growth rate in 2023 will be 6.5%.

However, the report said that there are four opportunities for growth in 2023 for Vietnam's economy. Specifically: Recent economic management policies show determination to boost the domestic economy; increasing import and export conditions for many industries in the context of China's reopening; opportunities from the wave of investment chain shifts and free trade agreements (FTAs) continue to be the driving force for trade growth.

In the context of general difficulties of the Vietnamese economy, in addition to policies to support and restore the economy, according to experts, it is necessary to continue to have breakthrough institutional reforms to promote further improvement of the business environment and competitiveness, at the same time, it is necessary to reform institutions and perfect policies to support the recovery of growth of the domestic private economic sector, especially small and micro enterprises in Vietnam.

Dr. Nguyen Quoc Viet, Deputy Director of the Institute for Economic and Policy Research, University of Economics - VNU, said: "Support policies to stabilize the macro economy are still one of the very good foundations to help restore the confidence of the market, investors and domestic consumers. Only with the stability of the macro economy will we have the foundation to make the market's confidence return.

The second factor is the determination of ministries and branches from the central to local levels to resolve difficulties and problems of enterprises, first of all, difficulties and problems in procedures and business conditions.

The third factor is the timely support of the State in resolving difficulties and problems, for example related to finding new markets and orders as well as recovering our domestic consumption. This is also a short-term solution to help businesses withstand and adapt, returning to recover production and business in the best way."

To improve business competitiveness and strengthen business linkages in the new context, the report also provides many policy recommendations in macro management. Notably, to facilitate access to information on policies and regulations supporting businesses, agencies need to widely publicize policies and regulations so that businesses can easily access information.

Based on economic forecasts, the Vietnam Economic Annual Report 2023 presents three GDP growth scenarios for 2023. In the low scenario, Vietnam's GDP growth rate in 2023 will only reach 5.5%. In the baseline scenario, the GDP growth rate will be 6%. In the high scenario, the GDP growth rate in 2023 will be 6.5%.

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