Better things are coming for Vietnam's economy

Based on the positive recovery momentum from the second half of 2023, economic experts and representatives of international financial organizations all believe that, despite many difficulties and challenges, the outlook for 2024 will be much more positive and better things will come to the Vietnamese economy this year.

Reforms to accelerate growth recovery Economic growth in 2024 will be very positive

Ms. Janet Yellen, US Secretary of the Treasury:

The United States and Vietnam have always been important economic and trade partners of each other.

Ms. Janet Yellen

During her first visit to Vietnam as US Treasury Secretary, Ms. Janet Yellen affirmed that the upgrading of the relationship between the two countries to a Comprehensive Strategic Partnership reflects the spectacular progress in bilateral relations, enhances understanding and trust, and demonstrates the US commitment to opening up new opportunities in economic cooperation between the two countries.

Since the normalization of relations in 1995, the United States and Vietnam have been important economic and trade partners; and Vietnam is a key partner in implementing US regional policy. The United States is currently working with Vietnam to enhance the resilience of regional supply chains, and Vietnam has potential in the semiconductor supply chain.

“We believe that long-term economic resilience requires a diversified global supply chain. This means deepening our economic integration with more countries we can count on – including Vietnam,” said the US Treasury Secretary.

Appreciating the efforts of the SBV in modernizing and enhancing the transparency of Vietnam's monetary and exchange rate policy framework to promote macroeconomic stability and ensure the safety and soundness of the banking system, the US Treasury Secretary believes that the solutions implemented by the SBV in the past are very important, helping to ensure macroeconomic stability and enhance the adaptability of the Vietnamese economy to developments in the world financial market and external shocks.

"It can be said that the management of monetary and exchange rate policies is being promoted well, suitable to Vietnam's conditions. Over the past two years, the world economy has experienced major shocks and in my opinion, flexible exchange rate management has helped Vietnam overcome these shocks," said Ms. Janet Yellen.

Mr. Andrea Coppola, WB Chief Economist in Vietnam:

Further strengthening the growth model

Mr. Andrea Coppola

Vietnam needs to consider extending the Recovery and Development Support Program until 2024 to ensure the effectiveness of policy implementation and support macroeconomic stability.

In the context of economic downturn, remaining vigilant against weaknesses in the financial sector; while efforts to restore confidence and promote healthy development of the real estate market will be key to supporting short-term economic stability and long-term economic growth.

Following the global recession in 2023, global economic growth is expected to slow further in 2024, including in Vietnam's key trading partners such as the United States. Subdued performance next year could be a result of the lagged effects of tightening monetary policy in 2023 amid tight credit conditions and weakening global trade. Key risks for 2024 include geopolitical risks, the impact of conflicts on energy prices, etc.

With global economic growth expected to slow further in 2024, Vietnam’s GDP growth target of 6% to 6.5% for 2024 is ambitious. Despite the global downturn, Vietnam’s export demand may gradually improve; economic growth will pick up slightly but will struggle to reach 6% or 6.5% unless domestic demand, consumption and investment accelerate further. Vietnam is forecast to recover to 5.5% in 2024 and 6.0% in 2025.

Vietnam needs to enhance its resilience to external shocks and leverage its internal strengths and domestic productivity to support economic growth. In this way, Vietnam can turn the challenges posed by the global economic downturn into opportunities to further strengthen its economic growth model.

Authorities can play an important role in supporting the economy through fiscal policy, by accelerating the implementation of infrastructure projects and transformational public investment projects, to boost economic growth in the short and long term. Continuing to promote private sector development and improve productivity by upgrading the skills of the workforce can further enhance the competitiveness of the private sector.

Mr. Shantanu Chakraborty, ADB Country Director for Vietnam:

Need to maintain balance and harmony between growth and inflation

Mr. Shantanu Chakraborty

According to the Asian Development Outlook (ADO) update report of ADB in December 2023, we forecast Vietnam's economic growth in 2024 at 6.0%. The weaker-than-expected recovery in external demand continues to hamper growth in industrial and service sectors, slowing the recovery of employment and domestic consumption. Therefore, I believe that the economic outlook for 2024 is optimistic, but still needs to be cautious. Because there are still some external obstacles related to the macroeconomic situation in Vietnam's major trading partners. If monetary tightening in these countries continues, it may affect Vietnam in 2024, especially exports.

But overall, the economy has shown strong resilience over the past year. Despite these headwinds, the Government is taking the right steps to address the challenges. Inflation and interest rates have been kept low; and Vietnam’s GDP growth in 2023 is quite good compared to other countries. The Government has balanced monetary and fiscal policies well to ensure high resilience to some of the global challenges facing the economy.

In addition, Vietnam’s economic outlook this year and beyond will depend on the level of public investment made, as well as attracting investment from the private sector to improve infrastructure and improve the country’s resilience to various aspects and challenges such as those related to climate change. Along with that, there is continued policy reform to ensure a strong policy framework that facilitates business development. Vietnam must do more to create a favorable business environment, ensuring certainty and consistency in regulations as well as in enforcement.

Regarding monetary policy, maintaining a balance between promoting economic growth, ensuring inflation does not get out of control, and ensuring reasonable interest rates are the most important pillars. So far, the Government and the SBV have done very well in this regard, on the basis of maintaining a much higher economic growth rate than many neighboring countries in Southeast Asia, while keeping interest rates and inflation low. In particular, the SBV has been very proactive in reducing interest rates and loosening monetary policy, thereby contributing to enhancing the resilience of the economy in 2023.

In 2024, what will the global inflation trend be like and how will major central banks operate their monetary policies; will there be disruptions to the global supply chain due to current instabilities and conflicts? I think such factors are a function of macroeconomic challenges and, together with other domestic factors, need to be taken into account in formulating and operating monetary policies this year, with the goal of achieving a balance and harmony between economic growth - inflation - interest rates.

Mr. Ngo Dang Khoa, Director of Foreign Exchange, Capital Markets and Securities Services, HSBC Vietnam:

Economic growth in 2024 could reach 6%

Mr. Ngo Dang Khoa

The year 2023 has passed with many challenges and difficulties. Entering the new year, everyone hopes for better things to come, and it seems that recent positive economic figures also support this.

After a low growth rate of less than 4% in the first 6 months of 2023, the figures have recovered more positively since the third quarter of 2023, partly due to improvements in trade. November 2023 also marked the third consecutive month of year-on-year export growth. In particular, sectors with export growth potential such as agricultural products continued to show significant improvement in the final months of the year. In addition to production, domestic consumption demand also continues to be a solid pillar for growth. Retail sales grew strongly thanks to the continued recovery of both domestic and international tourism. These factors helped GDP reach 5% for the whole year of 2023, creating the premise for economic growth in 2024 to reach about 6%.

In terms of foreign investment, Vietnam is one of the countries in the ASEAN region that has received significant FDI inflows, becoming a rising star in the global manufacturing supply chain. In 2024, FDI will continue to be a bright spot and one of the driving forces of the economy.

However, challenges remain. Exports such as textiles and footwear have yet to show signs of improvement, so it may be some time before trade sees a broad-based recovery. Another challenge is the huge need for investment in energy infrastructure. According to the Global Infrastructure Hub (GIH), Vietnam needs an average of at least US$25 billion per year in infrastructure spending over the next 20 years. However, compared to ASEAN countries, private sector participation in this sector is still limited. Therefore, it is hoped that the Government will have more policies to further encourage private sector participation in energy infrastructure.

In addition, inflation risks due to supply pressures, including food and energy prices and geopolitical risks, remain quite complex. We need to monitor these challenging factors, as well as policy synchronization to contribute to stabilizing supply factors, reducing price fluctuations, thereby continuing to promote sustainable economic growth.

On the policy front, a series of support measures through monetary and fiscal policies have been deployed to address growth concerns. The SBV maintains an accommodative monetary policy with four interest rate cuts in 2023, maintaining abundant VND liquidity, helping to guide lower interest rates and promote credit growth... Positive signs that inflation is likely to be controlled as well as the economic outlook are also showing a certain recovery momentum. Therefore, we expect the SBV to keep the policy interest rate stable at 4.50% for 2024.

On the fiscal front, the authorities have also announced various support measures, with levels almost equivalent to those introduced during the pandemic, such as VAT reduction, boosting public investment in key infrastructure projects, etc. In addition, measures to ease restrictions on tourist visas that have come into effect have also contributed to attracting an increasing number of tourists, contributing to tourism service revenue.