Vietnam’s economy is set to stay on track for a positive outlook, with a projected GDP growth of 6% in 2024 and 6.2% for the next year, according to the Asian Development Outlook (ADO) released today [September 25].

Overview of the press conference. Photo: Ngoc Mai/The Hanoi Times

 “Vietnam’s economy showed robust recovery in the first half of 2024 at 6.4%, nearly double the 3.7% a year earlier, and continues to maintain momentum despite global uncertainties,” said ADB Country Director for Vietnam Shantanu Chakraborty at the report launch. “This steady recovery has been driven by improving industrial production and a strong rebound in trade.”

The industrial sector continues to be a primary driver of growth, with external demand for major electronics fueling production. Vietnam’s recovery has also been supported by a rebound in the services sector and stable agricultural output. However, domestic demand remains sluggish, and subdued global economic prospects add uncertainty.

Inflation is expected to remain moderate at 4.0% for 2024 and 2025, although geopolitical tensions, including the conflict in the Middle East and the Russia-Ukraine war, could impact oil prices and potentially boost inflation, Chakraborty.

According to statistics, the industrial and construction sectors grew by 7.5% in the first half of the year, significantly higher than the 1.1% recorded during the same period last year. Manufacturing rose by 8.7%, driven by industries such as rubber, electronics, and computers.

Trade played a key role in supporting growth, with exports increasing by 14.5% and imports by 17% year-on-year in the first half of the year. The service sector also saw a rebound thanks to the recovery of tourism.

Foreign direct investment (FDI) into Vietnam continued to surge, with registered capital reaching $15.2 billion in the first half of the year. Disbursed FDI also rose to $10.8 billion, marking a year-on-year increase and the highest level in five years.

Electronics production at Katolec Vietnam Company in Quang Minh Industrial Park, Hanoi. Photo: Pham Hung/The Hanoi Times

ADB’s Principal Country Economist Nguyen Ba Hung added that several downside risks could slow the country’s growth momentum. External demand in major economies will remain weak, while geopolitical tensions and uncertainties related to the US election in November could lead to trade fragmentation, adversely affecting exports, manufacturing activity, and employment.

He pointed out another issue in domestic demand, with retail sales growing by only 8.5% in the first eight months of the year, lower than the 10.3% recorded during the same period in 2023.

Hung noted that raising domestic demand will require stronger fiscal stimulus measures such as accelerating public investment implementation, while maintaining low interest rates. Coordinated policy measures are essential to economic recovery, given relative price stability and weak demand.

According to the economist, Vietnam’s monetary policy will continue to aim for both price stability and growth, despite limited policy space.

“However, the heightened risk of non-performing loans due to continued regulatory relaxation on loan extensions limits the potential for further monetary easing. Any additional loosening of monetary policy should be closely coordinated with an expansionary fiscal policy, along with accelerating institutional reforms to support the economy,” he said.

Following strong economic growth in the second quarter and the first half of the year, the government has updated its projections, aiming for a GDP growth rate of 7% this year, higher than the National Assembly's target of 6-6.5%. Several international financial institutions, including the IMF, ADB, World Bank, and Standard Chartered, currently forecast Vietnam's growth at 6% for this year.