Vietnam's economy in 2024: Will there be a 'soft landing'?

According to Lecturer Ho Quoc Tuan of Bristol University (UK), without being too rosy, we are confident that the economy and financial markets will steadily weather the "headwinds" and hope for a "soft landing".

Without being too rosy, we are confident that the economy will weather the "headwinds" steadily, hoping for a "soft landing". (Source: Vietstock)

2023: Difficult beginning, pleasant end

2023 can be considered a fairly lucky year for the world economy in that no crisis occurred, despite significant obstacles such as USD interest rates exceeding 5%, defaults in US banks and the recession of the Chinese real estate market entering its third year without any signs of improvement. The complicated geopolitical developments in Israel and the Red Sea in the second half of the year have not been able to create any major shocks. Oil prices fell below 80 USD/barrel and inflation in Western economies at 8-11% has returned to the 3-5% range. These are successes that people were not sure about from mid-2023. In other words, the perspective on the economic outlook in the last days of 2023 is much more optimistic than at the beginning and middle of the year. Sitting at Heathrow airport waiting for my flight to Finland on May 23, I read the article “Experts are convinced that the US economy is about to enter a recession”. By the end of the year, we had no recession. And the forecast that China’s economy would not reach 4% in 2023 was also wrong. Those were positive signs for the end of the year. But at the same time, there were also signs that 2024 would be a more difficult year than 2023 in terms of macroeconomics. European manufacturing and purchasing managers’ indexes (PMIs) continued to show a narrowing rather than an expanding outlook. The Chinese economy was still struggling to maintain its target of 5% growth. Many factories’ incomes were falling, and the number of new high-quality and well-paid jobs in the economy was decreasing. The real estate market showed no signs of recovery, despite many support plans being implemented, the latest of which was a credit injection program into the social housing sector. In other words, the economic community is much more optimistic about the near-term outlook than it was at the start of 2023. Data collected from Bloomberg , Macrobond, and Steno Research shows that posts about “soft landings” significantly outnumber those mentioning “recessions.”

Challenge 2024

If everything goes as it has since late 2023, we can expect a not-so-bad 2024. As analyst Ed Yardeni puts it, the economy will be “resilient” in 2024. Undeniably, overall economic growth in 2024 is expected to slide in most major economies, from the US, Europe to China and India. According to the International Monetary Fund (IMF) forecast, the global economy will be more diversified in 2024 and the overall trend will still be slightly down compared to 2023. But this is already a good scenario and a soft landing scenario: growth only slows down slightly, does not cause an economic recession or financial market collapse, and that slight decline helps to restrain inflation, bringing the inflation rate down in places where inflation is still higher than the central bank’s long-term target, such as the US. If you read the reports of the analysis organizations, the economic decline will be mainly concentrated in the first months of the year, and the recovery will occur in the middle of the year. However, the above forecasts are based on the assumption that the global geopolitical situation will not become more complicated. This may be the first thing that will go wrong. 2024 is "the biggest election year in history" (to use the words of the Economist ), with a series of countries that play an important role in the global economy such as the US, Russia, India, the European Parliament and possibly the UK and Japan (elections are scheduled for 2025, but could be held earlier in 2024). At the same time, worrying developments in Israel and the Red Sea are raising the risk that the war in the Gaza Strip could escalate into a regional war in the Middle East. These developments are enough to create two important effects. That is, businesses will hold off on major investments for at least the first half of the year to observe policy developments and the views of new leadership candidates, and the escalating war in Gaza will create new risks of disruption to global supply chains. Combine that with the fragmentation of supply chains due to the impact of the friendly reshoring policy and the de-risking strategy that the US is launching in various forms to limit the rise of China, and it is clear that the peace we are feeling in the last months of 2023 could be broken at any time in 2024. In addition, high interest rates will not sink Western economies in 2023 because of the policy lag. Many loans at 1% or lower will not mature until mid-2024, and some economies will only really feel the impact of higher interest rates when they mature. While interest rates in the US and some European economies are expected to peak and fall in 2024, the cuts are expected to be modest, no more than 1%. This means that many loans will still mature at at least 2.5-3 times higher borrowing costs. Defaults will increase as a result, and are already being seen in some year-end figures. A quiet collapse in commercial real estate, especially in the office segment, is occurring, but not on the scale of the 2007-2009 crisis. However, there is no guarantee that it will not suddenly escalate into a mini-real estate crisis in the West. In the East, China may have hit rock bottom in its troubles, especially in the real estate sector. Analysts believe that the difficulties in selling new projects will gradually ease in 2024, but housing prices in major cities may need to fall further, as the government is directly supporting capital to complete social housing projects, increasing housing supply in tier-1 cities. However, general difficulties remain, so Chinese people will continue to tighten their belts and delay spending. That may lead to the first months of 2024 not creating a significant breakthrough in this populous country. With all the above risks, 2024 still has many uncertainties and the surge in US stock prices in the last days of 2023 and early 2024 may reverse at the end of the first quarter when the difficulties and risks become more evident. Therefore, many investors have diversified their portfolios into gold in the context of this precious metal increasing in price and possibly reaching a high of 2,200 USD/ounce in 2024 as predicted by Wells Fargo. However, the forecast of gold price of 2,200 USD/ounce, only 7-8% higher than the current price, also shows that people are not too pessimistic about the economy in 2024, as well as the risks that come with it. The general belief of the markets is still that "the economy is not too good, but not too bad" and the forecast that the stock markets will increase is still the main one. It is reasonable to say that the economy and the market will be "resilient" in 2024 at this time. Without embellishing, but confident enough that the economy and financial markets will steadily overcome the "headwinds" to hope for a "soft landing".

(according to Investment Newspaper)

Source: https://baoquocte.vn/kinh-te-viet-nam-nam-2024-lieu-co-ha-canh-mem-255971.html