Vietnam's economy has overcome the waves in a year

Looking back at 2023, the leader of a wood business with nearly 1,000 employees, based in Dong Nai, said "the storm has passed".

He said that last year, at many times the company's productivity dropped by more than half. "We were forced to cut costs, restructure production and find new partners. In general, we just had to find ways to survive," he shared.

2023 is a difficult year for the Vietnamese wood industry as consumer demand in major export markets such as the US and EU has decreased sharply, leading to a drop in orders, forcing many businesses to reduce production scale; some even had to close.

Last year, the export turnover of wood and wood products was estimated at 13.4 billion USD, down 16.2% compared to 2022. Thus, the industry's target of 17.5 billion USD in 2023 was not achieved. Currently, the wood industry accounts for nearly 3.8% of Vietnam's total export turnover.

Not only the wood industry, export sectors that bring in billions of dollars in revenue for Vietnam such as textiles, footwear and seafood also had a year of struggling to "stay afloat".

From the third quarter of 2023, the market will improve, and the number of orders will increase again. Although it has not yet recovered clearly, in the context of general difficulties, the leader of a wood business in Dong Nai said that this is like "having coal in the middle of winter".

Workers at Dony garment factory, Tan Binh district, Ho Chi Minh City. Photo: Quynh Tran

Many bright spots

A recent survey by VnExpress in collaboration with Board IV on 2,700 businesses shows that businesses are still facing difficulties, but confidence has returned. The number of units planning to expand their scale has doubled compared to before. They also assessed that the macroeconomic outlook is more positive this year.

"Businesses have basically returned to production after the sudden shocks caused by the global economy," said Ms. Pham Thi Ngoc Thuy, Director of Office IV. She also said that many business owners have managed quite well in restructuring, searching for markets, and catching up with new trends to compensate for the parts affected by difficulties.

According to experts, although the 5.05% growth rate in 2023 did not meet the plan, each quarter showed recovery when the following quarter was higher than the previous quarter, especially in the last months of the year.

For example, the agricultural sector, the economic pillar for many years, is seen as having a year of "going against the wind", with bumper harvests in some areas. Summarizing the sector in 2023, Prime Minister Pham Minh Chinh said that agriculture has turned from being confused and passive to being proactive and creative to overcome difficulties and create breakthroughs.

In fact, the agricultural group had an impressive growth year last year in the context of Vietnam's exports facing many difficulties due to reduced global demand. Exports of this group increased by 17% compared to the same period in 2022, with 6 items achieving an export value of over 3 billion USD. The average price of some major agricultural products such as coffee and rice increased sharply by double digits.

The tourism industry also had a year of efforts with many promotional and stimulus measures. Data from the Ministry of Culture, Sports and Tourism shows that the number of international visitors to Vietnam in 2023 reached over 12.5 million, exceeding the set target; the number of domestic visitors exceeded the annual plan, helping total tourism revenue increase sharply. Vietnam was also honored as the world's leading heritage destination for the fourth time.

Another pillar of the economy is public investment, which has changed dramatically since the beginning of the year. 2023 is the year when the amount of public investment capital allocated is at a record high (up 25% - about 110,000 billion VND compared to 2022), creating great pressure on disbursement.

"December was the month with a huge jump in disbursement, from 65% of the plan to 81%," said Deputy Minister of Planning and Investment Tran Quoc Phuong. This was achieved thanks to the determination of the Government, localities, and enterprises in implementing and overcoming difficulties. As a result, the disbursed capital last year reached about VND676,000 billion, the highest level in 4 years.

With the large amount of disbursed capital, last year, many important projects and infrastructures were started and put into operation. About 475 km of expressways were put into operation last year, bringing the total number of expressways in operation to 1,900 km. This helps Vietnam realize the goal of 3,000 km of expressways by 2025. A series of major transport infrastructure projects were started, such as Terminal T3 of Tan Son Nhat International Airport, Long Thanh Airport project is considered a highlight, supporting economic growth in the short term.

Meanwhile, attracting foreign investment is also considered "very impressive", according to the Ministry of Planning and Investment. Last year, Vietnam attracted nearly 37 billion USD and disbursed a record of over 23 billion USD.

Deputy Minister Tran Quoc Phuong said that Vietnam has made its mark with infrastructure, human resources and institutions with many measures to overcome difficulties in production and business. The Government also regularly dialogues with the business community, including the FDI group, to provide timely support. In fact, these are the points that foreign investors pay attention to when searching and expanding.

Besides efforts to improve the investment environment, Vietnam is also active in foreign affairs activities, especially high-level foreign affairs to cooperate economically, expand markets, and attract high-quality capital sources.

Deputy Foreign Minister Bui Thanh Son said that in 2023, key leaders will make 22 visits to neighboring countries, important partners, and traditional friends; in contrast, there will be 28 visits by senior leaders to Vietnam along with hundreds of high-level meetings at forums and summits. Among them, there are historic visits to Vietnam such as those by Chinese President Xi Jinping and US President Joe Biden.

Euro Cham Gabor Fluid, Chairman of Euro Cham, also commented that Vietnam is a rising star in attracting foreign direct investment (FDI). According to him, FDI increased by more than 32% last year, demonstrating the growing confidence of investors in this economy of more than 100 million people.

In addition to traditional investment sectors, Vietnam has recently become the focus of attention for many emerging industries, such as semiconductors and high-tech industries.

There are still unpredictable shocks.

However, according to experts, Vietnam's economy still faces many challenges from unpredictable external shocks, along with internal problems that have not been resolved.

Of the 2,700 businesses surveyed in the 2023 economic survey by the IV Board, more than 69% rated it negative or very negative. Nearly 73% of units plan to reduce their scale, suspend or cease operations. Businesses said they still face difficulties with orders, cash flow, administrative procedures and the risk of criminalizing economic transactions.

The Government's 2023 economic report also mentioned some shortcomings of the economy, such as difficult access to credit; the real estate market is sluggish due to segmentation problems and legal problems. Handling weak credit institutions and remaining backlog projects is difficult due to having to carry out many processes and procedures, including accurately assessing and appraising the value of assets that have been in use for many years. Administrative procedures, especially investment procedures, are still cumbersome.

Therefore, many experts and businesses have expressed cautious views on the economy in 2024 despite more optimistic forecasts. The Central Institute for Economic Management (CIEM) said that this year's GDP could increase by 6.48% in the best scenario. The Asian Development Bank (ADB) also forecasts that Vietnam's economy will grow more strongly in 2024, reaching 6%, equivalent to the level assigned by the National Assembly.

Faced with unpredictable developments, many experts believe that the Government needs to step up response measures. "Vietnam should leverage its internal strengths, promote infrastructure projects, and transformative public investment to support short- and long-term growth," noted Andrea Coppola, chief economist of the World Bank. In addition, Vietnam should also develop the private sector and improve productivity.

Similarly, HSBC Bank recommends that Vietnam needs to improve its infrastructure, labor, and business environment indicators to increase its attractiveness to investors. Because FDI and services are two factors contributing to this year's economic outlook by helping to increase production capacity and creating opportunities for exports.

In its report submitted to the Prime Minister, Committee IV recommended that the Government and localities continue to promote measures to support businesses in 2024. This is an urgent time to continue to relax the people and businesses to foster confidence and recovery capacity.

While authorities are planning various support measures for businesses on both the supply and demand sides, businesses say they will "not give up in the face of challenges".

"The economy is down fast but up very slowly. Businesses need a lot of time and resources to recover. We are not giving up. The more dangerous the better, but we also need more support," said the owner of a wood business in Dong Nai.

Duc Minh

Graphics : Hoang Khanh - Thanh Ha

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