GDP growth lower than expected, pressure in the last 6 months of the year is huge

Speaking at the opening of the workshop, Ms. Tran Thi Hong Minh, Director of the Central Institute for Economic Management, said that Vietnam is a developing economy and is in the dynamically developing Asia-Pacific region. Therefore, maintaining macroeconomic stability and social security are indispensable foundations, but Vietnam must still strive to achieve the highest goals, including promoting high-quality and sustainable economic growth. “Vietnam still emphasizes a comprehensive approach, combining socio-economic recovery and development with building an independent, self-reliant economy, associated with proactive and active international integration. The recent context requires Vietnam to continuously monitor, evaluate, and forecast world economic developments and their impacts on the Vietnamese economy. It can be seen that the Government has closely and cautiously assessed international and domestic economic trends and issues,” Ms. Tran Thi Hong Minh emphasized.

Conference scene.

Despite the gap compared to the set target, Vietnam's economic growth has improved between quarters, reaching 3.28% in the first quarter of 2023 and 4.14% in the second quarter of 2023. In the first 6 months of 2023, the growth rate reached 3.72%.

In the first 6 months of 2023, the average CPI increased by 3.29% over the same period in 2022, much lower than the target set for the whole year of 2023 (4.5%). This is an important success in managing socio-economic policies in the first months of the year.

The disbursement rate of public investment capital as of June 30 reached 30.49% of the plan assigned by the Prime Minister, higher than the same period in 2022 (27.75%) and in absolute terms, VND 65.1 trillion (about 43%) higher than the same period in 2022. Vietnam's FDI attraction is estimated at 13.43 billion USD, down 4.3%, but the implemented capital of FDI increased by 0.5%.

In the first 6 months of 2023, the country's export activities faced many difficulties. The total export value in the first half of 2023 is estimated at 164.5 billion USD, down 12.1%. The total import value is estimated at 152.2 billion USD, down 18.2%. However, Vietnam still maintains a trade surplus (estimated at more than 12.2 billion USD).

Despite some bright spots, GDP growth in the first half of the year is lower than the set scenario, creating pressure on growth management, macroeconomic stability, and major balances in the last 6 months of the year. Meanwhile, the resilience of domestic enterprises is still weak after a long period of being affected by the Covid-19 pandemic, many enterprises have reached the limit, especially small and medium enterprises.

Update 3 scenarios for GDP growth

The report updates the forecast results for 2023 under 3 scenarios. Scenario 1 assumes that global economic factors continue to be consistent with assessments by international organizations, and Vietnam maintains similar policy efforts as in the second half of 2021-2022. Accordingly, GDP growth is forecast to reach 5.34% in 2023. Exports for the whole year of 2023 will decrease by 5.64%. The average CPI for the whole year of 2023 will increase by 3.43%. The trade balance will reach a surplus of 9.1 billion USD.

Stimulating domestic consumption to boost production activities is a solution contributing to GDP growth in the last 6 months of the year.

Scenario 2 maintains most of the assumptions in Scenario 1 regarding the world economic factors, but with some adjustments to more positive monetary and fiscal easing in Vietnam. Accordingly, GDP growth is forecast at 5.72% in 2023. Exports for the whole year of 2023 decreased by 3.66%. The average CPI for the whole year of 2023 increased by 3.87%. The trade balance reached a surplus of 10.3 billion USD.

Scenario 3 assumes that the global economic context has some more positive changes (growth recovers, supply chain disruptions have significantly decreased, inflation in the US has decreased, weather is more favorable, etc.) and drastic reforms and administration in Vietnam, thereby helping to achieve maximum results in disbursement/absorption of public investment and credit, improve the business environment and labor productivity, promote and implement investment activities in a more effective direction. Accordingly, GDP growth is forecast at 6.46% in 2023. Exports for the whole year of 2023 decreased by 2.17%. The average CPI for the whole year of 2023 increased by 4.39%. The trade balance reached a surplus of 6.8 billion USD.

At the workshop, experts emphasized that Vietnam's economic prospects in the last months of 2023 may be affected by many factors. These include the level of monetary tightening in key economies; foreign investment flows will continue to shift in the context of countries preparing to implement the global minimum tax mechanism; Vietnam's capacity to harmoniously and simultaneously implement both digital and green transformations...

Accordingly, the Government needs to review all growth drivers to stimulate growth. In particular, it is necessary to immediately remove difficulties for businesses to increase growth drivers. Along with that, it is necessary to review growth drivers such as import and export, domestic consumption, and public investment disbursement.

In particular, it is necessary to tighten administrative discipline and order; promote administrative procedure reform to remove difficulties for the business community to unleash the driving force from private sector investment.

VU DUNG