“Vietnam’s economy is expected to grow at a solid pace this year and the next, despite a challenging global environment,” said ADB Country Director for Vietnam Shantanu Chakraborty.

ADB Country Director for Vietnam Shantanu Chakraborty (central) chairs the conference held in Hanoi on April 11. Photo: Ngoc Mai/The Hanoi Times

“However, global geopolitical uncertainties and domestic structural fragilities could impact the outlook. Therefore, policy measures in 2024 will need to combine short-term growth support measures to strengthen domestic demand with long-term structural remedies to promote sustainable growth,” said Chakraborty during the launch of ADB’s latest Asian Development Outlook (ADO) report released today [April 11].

This year, Vietnam’s GDP growth is forecast to hit 6% in 2024 and 6.2% for the subsequent year.

The report noted that subdued global demand and high international interest rates weighed on Vietnam’s growth in 2023. However, a rapid shift to an accommodative monetary policy and sizeable public investment were among the key measures to sustain a growth recovery in 2023.

A relatively broad-based restoration in export-led manufacturing and services, as well as a stable performance of the agriculture sector, are expected to support Vietnam’s recovery momentum. Manufacturing expanded at 6.8% in the first quarter of 2024, compared with the contraction of 0.5% a year ago, contributing to industrial growth of 6.3%. Lower interest rates, pro-growth fiscal measures, and the recently improved land regulatory framework should support construction.

Meanwhile, positive inflows of foreign direct investment (FDI) and remittances, a sustained trade surplus, recoveries in domestic consumption, and continued fiscal stimulus characterized by a substantial public investment program are seen as key to boosting growth in 2024.

To accelerate growth, stronger measures are required to address domestic structural vulnerabilities, such as a heavy reliance on FDI-led manufacturing exports, weak linkages between manufacturing export industries and the rest of the economy, incipient capital markets, an overreliance on bank credit, and complex regulatory barriers to business.

In addition, low domestic interest rates, fiscal policy measures, and wage increases will spur consumption-led services in 2024. Retail sales in the first quarter of 2024 were 8.2% higher than the same period of 2022.

Revived economic activity, albeit slow, will elevate logistic services, while liberalized visa policies are likely to boost tourism, Hung said.

Overall, services are forecast to expand by 7.7% in 2024. Global demand for agricultural commodities and free trade agreements will continue supporting agricultural exports.

Another key driver for growth mentioned by Hung is public investment," whose effective implementation is crucial,” said Hung.  A sizable amount of public investment, equivalent to $27.3 billion, has been programmed for disbursement this year. Together with disbursements from 2023, this additional public investment would significantly stimulate growth.

Although the Government has taken various measures to expedite public investment and enhance effective execution, more systematic measures are required to improve legal and regulatory processes and so reduce constraints on efficient delivery, he continued.

“By proactively addressing these obstacles in an integrated manner throughout the project cycle, Vietnam can unlock the full potential of its public investment initiatives, driving sustainable economic growth and development,” he concluded.