The economy aims to achieve a growth rate of 7% in 2024.

Following the impressive economic growth in the second quarter and the first six months of 2024, the Ministry of Planning and Investment has updated its growth scenario for 2024, aiming for a 7% growth rate for the whole year.

First half of 2024: Where did the growth come from?

There was a strong consensus among government members and local leaders when discussing the socio -economic situation in the second quarter and the first six months of 2024. Accordingly, with GDP growth estimated at 6.93% in the second quarter and 6.42% for the first six months, exceeding the upper limit of the scenario outlined in Resolution 01/NQ-CP, it can be confidently asserted that the economy is recovering.

Reporting at the Government-Local Authorities Conference last weekend, Minister of Planning and Investment Nguyen Chi Dung also emphasized this point. According to the Minister, in the context of a challenging economy, many localities have made efforts, demonstrated determination, and adopted innovative approaches to achieve high growth rates in the first six months of the year. For example, Bac Giang achieved a GRDP growth rate of 14.14% in the first six months, Khanh Hoa 12.73%, Thanh Hoa 11.5%, Hai Phong 10.32%, and Hai Duong 10%…

The rapid increase in orders is a key factor driving industrial production and exports in the coming months.

The strong growth in many localities has made a significant contribution to the country's GDP growth reaching a relatively high level in the second quarter and the past six months. "The growth drivers from the supply side continue to show positive developments, and the growth drivers from the demand side are recovering more positively," Minister Nguyen Chi Dung said.

Accordingly, on the supply side, the agriculture, forestry, fisheries, and services sectors maintained a fairly strong growth momentum; the industrial and construction sectors recovered quickly, acting as a driving force for growth. Specifically, the added value of the industrial sector in the second quarter increased by 8.55%, and the overall increase for the first six months was 7.54%; of which the processing and manufacturing industry increased by 10.04% in the second quarter and 8.67% for the first six months.

Total retail sales of goods and consumer service revenue in the second quarter of 2024 increased by 8.8% compared to the same period last year, with an overall increase of 8.6% for the first six months; international visitors reached over 8.8 million people in the first six months, an increase of 58.4%. Exports continued to be a bright spot, especially exports of agricultural, forestry, and aquatic products. In the first six months, total export turnover reached over 190 billion USD, an increase of 14.5% compared to the same period last year…

Meanwhile, on the demand side, total social investment in the second quarter increased by 7.5% year-on-year; the first six months saw a 6.8% increase, with private investment rising by 6.7% – compared to only 1.8% in the same period of 2023. Total registered foreign investment in the first six months reached nearly US$15.2 billion, a 13.1% increase year-on-year, of which newly registered capital reached over US$9.5 billion, a 46.9% increase; and implemented capital was approximately US$10.8 billion, an 8.2% increase.

Emphasizing macroeconomic indicators, Deputy Minister of Planning and Investment Tran Quoc Phuong, in an interview with a reporter from Investment Newspaper, affirmed that these are the reasons why GDP growth in the second quarter and the first six months of the year was so positive.

In fact, when the GDP growth statistics for the second quarter and the first six months of the year were released, many questioned why GDP growth was so high in the current difficult circumstances. However, Deputy Minister Tran Quoc Phuong affirmed that one must "completely trust the statistics."

“The main drivers of growth are all strong, with both industrial production and exports recovering strongly. The service sector is growing very well, a bright spot in the economy. The agricultural sector is also growing, making a positive contribution to growth,” Deputy Minister Tran Quoc Phuong said.

Of course, according to Deputy Minister Tran Quoc Phuong, in the overall picture of the economy, there are some dark spots, such as the difficulties in the retail sector, the high number of businesses withdrawing from the market, and the challenges in the real estate market..., but the bright colors remain dominant.

Striving to achieve a growth rate of 7%

Following the positive growth in the second quarter and the first six months of the year, the Ministry of Planning and Investment, based on the full-year forecast, has updated its economic growth scenarios for 2024. Accordingly, two growth scenarios have been presented.

Specifically, in Scenario 1, the GDP growth for the whole year reaches 6.5% (close to the upper limit of the target set by the National Assembly). Accordingly, growth in the third quarter is 6.5%, and in the fourth quarter is 6.6% (the scenarios in Resolution No. 01/NQ-CP were 6.7% and 7.0%).

Scenario 2 projects an annual GDP growth rate of 7%, with Q3 growth at 7.4% and Q4 growth at 7.6%, which is 0.7 percentage points and 0.6 percentage points higher than the scenarios in Resolution No. 01/NQ-CP, respectively.

Two scenarios were presented, but the Ministry of Planning and Investment recommended choosing the scenario of 6.5-7% growth for the whole year, striving to reach a high level (7%). According to Minister Nguyen Chi Dung, the Ministry of Planning and Investment's recommendation is based on six factors. These are: positive growth trends from economic sectors; faster recovery of private investment and state-owned enterprises; sustained positive growth in foreign investment; maintaining and accelerating export growth, especially focusing on major markets showing signs of slowing down such as China and Japan…

In addition, tourism and consumption are growing faster, striving to achieve and surpass the target of attracting international tourists; new policies and legal regulations are being prepared for issuance and will come into effect; the government and the Prime Minister are providing decisive direction and management; and ministries, sectors, and localities, especially the leading economic localities, are making efforts and demonstrating determination.

"If the growth momentum continues to be maintained and further boosted, and if these localities achieve higher growth rates, the growth rate in 2024 is likely to reach, or even exceed, the upper limit of the target set by the National Assembly (6.5%)," Minister Nguyen Chi Dung emphasized.

Indeed, there are high expectations for an acceleration of the economy in the last two quarters of the year, so that the whole year can achieve and surpass the 6.5% growth target. The strong rebound in the Purchasing Managers' Index (PMI) could be one of the positive indicators. According to S&P Global, Vietnam's PMI rose sharply to 54.7 points in June, compared to 50.3 points in May. This result not only shows improved health in the manufacturing sector for the third consecutive month, but also indicates significantly stronger business conditions.

“Vietnam’s manufacturing sector rebounded strongly in the middle of the year, overcoming relatively modest growth in recent months, thanks to a rapid increase in new orders,” said Andrew Harker, Chief Economist at S&P Global Market Intelligence.

The rapid increase in orders will be a key factor driving strong growth in industrial production and exports in the coming months, thereby boosting economic growth and the recovery of the business sector.

Meanwhile, while UOB Bank's Global Market and Economic Research Department maintains its forecast of 6% GDP growth for Vietnam in 2024, it emphasizes the "strong performance" of both the manufacturing and services sectors. This is why Vietnam's GDP growth reached a high level in the second quarter and the first six months, far exceeding the 3.84% recorded in the first half of 2023.

"This positive result creates a positive signal for the remainder of this year, after a challenging 2023," UOB stated.

Focus efforts on growth.

Although the current economic trend is positive, achieving many important results and providing a foundation for striving to reach and surpass the 6.5% growth target, Minister Nguyen Chi Dung frankly admitted that the difficulties and challenges in the remaining months are significant.

Besides factors such as macroeconomic stability still fraught with risks, significant inflationary pressure (inflation often rises towards the end of the year), and unpredictable influencing factors, especially global price fluctuations, and the psychology and expectations of people and businesses, Minister Nguyen Chi Dung believes that growth drivers still face many difficulties and challenges, requiring focused efforts to improve and overcome obstacles in order to create breakthroughs for growth throughout the year.

For example, on the supply side, while the growth of the agricultural and service/tourism sectors in the past six months closely followed the scenario outlined in Resolution 01/NQ-CP, they are facing rising production costs and intense competition. Similarly, the industrial and construction sectors, although the main drivers of growth and having grown faster than the projected scenario in the past six months, are heavily dependent on economic recovery and purchasing power in major export markets.

Meanwhile, the growth of the construction industry depends on the recovery of the real estate market, the progress in resolving obstacles, and the implementation of investment projects and public investment. “New sectors and fields such as the digital economy, green economy, AI, chips, semiconductors… have not yet seen significant progress, and there is a risk of not catching up with the world and the region,” Minister Nguyen Chi Dung acknowledged.

This is noteworthy because in recent directives, the Prime Minister has consistently emphasized promoting new growth drivers. Until these drivers show "clear progress," it is difficult to expect breakthrough economic growth.

Meanwhile, on the demand side, investment recovery remains slow. Domestic purchasing power in the first six months increased at a lower rate than the same period in 2023 and the 2015-2019 period. Export growth is also showing a tendency to slow down.

“Besides localities with good growth rates, there are 13 localities with growth rates below 5% in the first six months, including Ba Ria – Vung Tau (down 1.42%), Son La (up 0.67%), Bac Ninh (up 2.32%), Quang Nam (up 2.68%)…,” Minister Nguyen Chi Dung said, adding that the Ministry of Planning and Investment has worked with 20 associations and surveyed approximately 30,000 businesses, finding that the biggest difficulties for businesses are low market demand, competitive pressure, and high production costs. A significant number of businesses are facing financial difficulties, high interest rates on loans, and cumbersome administrative procedures…

These difficulties will significantly impact the achievement of the 6.5% growth target, or even the aspiration to reach 7% this year. Therefore, in the Prime Minister's directive, to focus on growth, it is necessary to continue promoting exports, stimulating domestic consumption, and especially accelerating the disbursement of public investment capital… The efforts of localities, especially the economic powerhouses, are also crucial to maintaining the momentum of economic recovery.

"To achieve the growth target of 7.5-8% this year, Ho Chi Minh City's GRDP growth in the third quarter must exceed 7%, and even higher in the fourth quarter," said Chairman of the People's Committee of Ho Chi Minh City, Phan Van Mai, adding that to accelerate growth in the remaining two quarters, the city will strive and seek all possible solutions to boost growth.

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