ADB has revised Vietnam’s GDP growth forecast for this year to 5.8% from its previous projection of 6.5% in July and to rebound to 6.2% in 2024.

However, the rate remains well above the average for developing economies in Asia and the Pacific at 4.8%, making it one of the fastest-growing economies in the region, behind only India (6.4%) and the Philippines (6%).

In its latest Asian Development Outlook (ADO) report, the ADB said Vietnam's growth slowed from 6.5% year-on-year in the first half of 2022 to 3.7% a year later, as external demand weakened and manufacturing output growth slowed to just 0.4%-the lowest half-year figure in a dozen years.

The manufacturing PMI has been stuck below 50 since March 2023, as weaker trade growth shuttered many businesses, particularly in export-driven manufacturing. Industrial production has also been hit by recent power outages in the North and problems in the real estate sector.

A credit crunch in response to the corporate bond market and banks' exposure to elevated real estate risk weighed on construction. Meanwhile, a rebound in domestic travel boosted consumption, with retail sales up 11% year-on-year in the first half of 2023.

Meanwhile, the country's inflation is projected to slow to 4% in 2023 and 2024.

For Asia and the Pacific, the ADB noted that robust domestic demand and the reopening of China continue to support the region's recovery.

ADB Chief Economist Albert Park said Asia and the Pacific continue to recover from the pandemic at a steady pace.

He added that domestic demand and services activity is driving growth, while many economies also benefit from a strong recovery in tourism. However, industrial activity and exports remain weak, and the outlook for global growth and demand next year has deteriorated.

ADB is maintaining its growth forecasts for most subregions in Asia and the Pacific. Exceptions include Southeast Asia, where the outlook is lowered to 4.6% this year and 4.9% next year, compared with April estimates of 4.7% and 5.0%, respectively. The forecast for Caucasus and Central Asia is revised down marginally to 4.3% from 4.4% for 2023, and to 4.4% from 4.6% in 2024.