Vietnam ensures high economic resilience

The Vietnamese government has achieved a balance between monetary and fiscal policies to stabilize the macro economy while maintaining a fairly good growth rate compared to many countries in the region and the world.

ADB: Việt Nam bảo đảm sức chống chịu cao của nền kinh tế

Mr. Shantanu Chakraborty, Country Director of the Asian Development Bank (ADB) in Vietnam. (Source: VGP)

Mr. Shantanu Chakraborty, Country Director of the Asian Development Bank (ADB) in Vietnam, shared with TG&VN reporters about Vietnam's economic achievements, prospects and growth drivers this year.

In 2023, Vietnam's economy will grow by 5.05%. How do you assess this growth rate? What are the bright spots of the economy?

2023 is a year of many difficulties and challenges for Vietnam in the context of global economic instability and increasing geopolitical tensions in the world. However, Vietnam's economy still grew by 5.05%, showing strong resilience despite unfavorable external conditions that negatively affected export activities.

Although not as expected, the economy still achieved relatively high growth - something that many other economies desire.

In the Asian Development Outlook report in December 2023, ADB forecast Vietnam's economic growth in 2023 at 5.2% - close to the level announced by the General Statistics Office (Ministry of Planning & Investment).

It can be seen that the country has taken the right steps to ensure the high resilience of the economy to global challenges. More specifically, the Government has achieved a balance between monetary and fiscal policies to stabilize the macro economy while maintaining a fairly good growth rate compared to many countries in the region and the world .

The main factors that help the economy recover quite well - these can also be considered bright spots of the economy in 2023 - include public investment disbursement and the recovery of domestic services and tourism.

Although public investment disbursement has not yet met expectations, it has had an impact on promoting domestic consumption. The foreign direct investment (FDI) sector has also shown positive results. Our assessment report and the data released by the General Statistics Office both agree that in 2023, Vietnam has done a good job of attracting and disbursing foreign direct investment (FDI) flows.

Besides the positive points, in your opinion, what difficulties did the economy encounter last year?

We appreciate the Government's efforts in flexible macroeconomic policy management and timely response to difficulties and challenges in 2023. Vietnam's lower-than-expected economic growth is due to objective reasons of the external environment as well as internal problems.

Weakening global demand, including a slow recovery in China, has negatively affected Vietnam’s export-oriented manufacturing sector. In addition, persistently high interest rates in the US and the Eurozone, along with a stronger USD, could further complicate the recovery of external demand and put pressure on the VND/USD exchange rate.

In addition, rising geopolitical tensions have disrupted global trade flows and supply chains.

As an export-oriented and highly open economy, Vietnam’s economy is facing increasingly strong “headwinds”, which can be easily seen in the negative trade growth figures, despite a fairly large trade surplus of nearly 26 billion USD. This means that export orders in the manufacturing sector have not yet fully recovered, and the job market in this sector is still unstable.

Another challenge is that credit growth remains slow. As of early December 2023, credit growth had only reached 9.15% compared to the target of 14-15% set by the State Bank of Vietnam. This is a sign that credit demand is still low due to slow economic recovery, including challenges from the real estate business sector.

Finally, systemic domestic problems related to public investment disbursement and structural weaknesses of the economy are challenges to Vietnam's economic growth not only in 2023 but also in the following years, if the situation does not improve.

Vietnam needs to continue to increase fiscal measures combined with appropriate monetary policies such as keeping interest rates at relatively low levels to boost domestic consumption. (Source: Shutter Stock)

Vietnam's growth target for 2024 set by the National Assembly is 6-6.5%. What is your assessment of Vietnam's economic prospects this year? What will be the growth drivers?

Recent reports from ADB have predicted that global economic growth will slow down in 2024. Therefore, external demand is also expected to recover slowly. Uncertainties in the global economy will continue to affect Vietnam's economy this year.

However, in the updated report published in December 2023, our Bank remains optimistic about Vietnam's economic growth prospects and maintains its growth forecast at 6% in 2024, with the assessment that the external sector will have a certain recovery and domestic growth drivers will continue to recover from 2023.

The main factors that help Vietnam's economy recover quite well - these can also be considered bright spots of the economy in 2023 - include public investment disbursement and the recovery of domestic services and tourism.

Macroeconomic stability will be an important foundation for maintaining Vietnam's economic growth momentum in 2024, with public investment, domestic consumption and exports being the three main growth drivers. Vietnam needs to continue with the prudent fiscal policies and flexible monetary policies that have been applied since 2023 to maintain macroeconomic stability and maintain growth momentum.

Furthermore, Vietnam still has much room to boost public investment as a fiscal stimulus. Accelerating the disbursement of public investment capital into important infrastructure projects not only stimulates economic activities in general, but also directly supports businesses, increasing job opportunities.

Vietnam needs to continue to increase fiscal measures combined with appropriate monetary policies such as keeping interest rates at relatively low levels to promote domestic consumption. In the context of slow recovery of the global market, Vietnam needs to be more proactive in seeking and expanding new markets, while promoting the exploitation of Free Trade Agreements (FTAs) it has signed.

What recommendations do you have for Vietnam to unlock development and growth resources this year?

The Government needs to continue to take stronger measures to improve the effectiveness of directing the implementation of economic management policies in general. Monetary policy easing needs to be done cautiously in the context of remaining inflationary pressures.

In the short term, it is necessary to expand fiscal policies and use monetary policy as a support tool. Coordinated policies can effectively support economic recovery.

Statistics show that Vietnam's export activities still depend heavily on foreign direct investment enterprises. When external demand decreases, the export turnover of domestic enterprises cannot compensate for the decrease in turnover of FDI enterprises. Therefore, it is necessary to continue to promote economic restructuring reforms.

On the other hand, domestic enterprises need to proactively seize opportunities to transform technology and digitally transform more strongly to create values in the value chain, in order to improve export activities and participate more deeply in global supply chains.

While the global economy is forecast to continue facing many challenges, Vietnam needs to consider this as an opportunity to enhance its competitiveness by promoting reforms to enhance the quality of public services, further improving the business investment environment, cutting bureaucratic procedures, etc. to create more favorable conditions for domestic enterprises, while attracting more quality FDI capital flows.

Thank you!

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