Power shortages could affect Vietnam's economy

In the Vietnam macroeconomic update report released on the morning of June 19, the World Bank (WB) said that the North will begin to experience a shortage of electricity for consumption and production at the end of May 2023, which if not resolved promptly could affect the economy.

WB: Tình trạng thiếu điện có thể ảnh hưởng đến kinh tế Việt Nam

WB: Power shortages could affect Vietnam's economy (Source: Investment Newspaper)

According to the World Bank, in May 2023, merchandise exports were 6% lower than a year ago due to weak external demand.

Imports decreased by 18.4% in May 2023 (compared to the same period last year), reflecting the continued slowdown in demand for input materials from both foreign direct investment (FDI) and domestic enterprises. This may indicate that production and export activities will continue to progress slowly in the coming months.

Consumer price index (CPI) inflation recorded a fourth consecutive monthly decline, from 2.8% (y/y) in April to 2.4% (y/y) in May, due to lower global energy prices and domestic transportation costs.

In addition, FDI commitments slowed in May 2023 as global uncertainties continued to weigh on investor confidence. FDI disbursement reached $1.8 billion in May, similar to the same period in 2022.

The State Bank of Vietnam has cut the refinancing rate from 5.5% to 5% and the overnight lending rate from 6.0% to 5.5%. This is the third consecutive rate cut since March 2023.

According to the bank, as inflation shows signs of decreasing, the State Bank of Vietnam has loosened monetary policies to support the economy. The WB recommends that the monetary policy management agency will need to closely monitor differences in monetary policy trends compared to other countries, which could create pressure on capital flows and exchange rates.

In parallel, the WB said that at the end of May, the North began to lack electricity for consumption and production, which if not resolved promptly could affect the economy.

This comes amid continued weak external demand and global uncertainties that are having an adverse impact on the economy, leading to shrinking exports and imports and slowing industrial production.

This agency commented: "In the coming time, Vietnam needs to accelerate the disbursement of public investment capital (including national target programs) to support aggregate demand and economic growth in the short term.

At the same time, prioritizing investment in digital and green technology, infrastructure and human resources will help promote long-term sustainable development.

In addition, it is necessary to quickly identify support for affected workers and households through the social protection system. At the same time, streamlining administrative procedures and removing legal barriers will help promote necessary business activities and investments."

Source