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Vietnam’s economy - Predict slower growth in 2023

Vietnam’s economy - Predict slower growth in 2023

Tuesday 29, 11 2022
Slowing global growth and increased risks of financial instability could weigh on Vietnam's economic growth in 2023 and 2024.

Outside factors to affect Vietnam’s economy in 2023

In 2022, Vietnam’s economy has performed excellently, thanks to a recovery in consumer spending, strong exports in several quarters, and the gradual rebound of international tourism.

Vietnamcredit Vietnam’s GDP growth

Vietnam’s GDP growth in the third quarter of 2022 exceeded what was previously forecast. The country's GDP in 2022 is estimated to increase by 13.67% over the same period in 2021, bringing the growth in the first 9 months of 2022 to 8.83%. The core inflation rate is kept below the anticipated rate of 4% a year.

However, slowing global growth and increased risks of financial instability could weigh on growth in 2023 and 2024.

Ms. Ramla Khalidi, UNDP Resident Representative in Vietnam, said that while Vietnam's economic prospects are bright, risks are increasing. She made the statement during the second Vietnam Economic Pulse 2022 Forum, co-hosted by the National Centre for Socio-Economic Information and Forecast (under the Ministry of Planning and Investment) and the United Nations Development Programme.

It is mentioned in this forum that the increasing risks that may hinder the growth of Vietnam’s economy are outside factors. Some of the most problematic ones are the Ukraine conflict, the slowing economy in China, the rising international interest rate, the stronger US dollar, and the growing risk of a European recession. Those factors could affect the demand for Vietnamese exports and increase the risk of instability in the macroeconomy.

Vietnamcredit domestic risks

There are also domestic risks, particularly in the banking and bond markets, which are very sensitive to rapidly changing conditions in the real estate sector. The negative impacts of climate change will increasingly weigh on agricultural production, and the health and well-being of communities affected by sea level rise, floods, droughts, and hurricanes.

Two scenarios for 2023

At the Forum, Mr. Francois Painchaud, Chief Representative of the International Monetary Fund (IMF) in Vietnam and Laos, said that with strong growth until September, the IMF has revised its GDP growth forecast for Vietnam in 2022 from 6 to 7-7.5%. However, the IMF lowered its growth forecast for 2023 to 5.8% due to slowing external demand and tighter financial conditions. Inflation is expected to pick up before gradually returning below 4%

Dr. Tran Toan Thang, Head of the National Centre for Socio-Economic Information and Forecast, said that the economic recovery in 2023 will continue to benefit from the implementation of the Economic Recovery Program 2022-2023. It is forecasted that Vietnam will still try to maintain the target of stabilizing interest rates and exchange rates, keeping interest rates low to support growth. Regarding fiscal policy, the investment component of the Support Program - amounting to about 1.6% of GDP - is expected to be implemented mainly from 2023 onwards.

However, with a high growth foundation in 2022, Vietnam's economic growth in 2023 will slow down, gradually returning to its pre-Covid-19 level, as the domestic demand rebound may not be as strong as that of 2022. The higher raw material prices begin to translate more clearly into production costs. Import and export may increase more slowly than in 2022 due to the prolonged difficult situation of Vietnam's main export markets. Foreign investment attraction is forecast to remain low due to increased global economic risks.

Vietnamcredit influencing factors mentioned

With the influencing factors mentioned, Vietnam's economy in 2023 can happen under two scenarios. In the first scenario, economic growth may be only 6-6.2% if risk factors outweigh the established recovery trend in 2022. In the second one, which is more optimistic, economic growth may reach 6.5-6.7% if the recovery process is more favorable, and the impacts from the international context are not too great.

Which scenario will play out for Vietnam's economy in 2023 depends on many factors, namely the developments in the Russia-Ukraine conflict, the recovery of the global economy, and especially Vietnam's major economic partners. There are also efforts to implement solutions to promote economic growth, the Socio-economic Recovery and Development Program.


Compiled by VietnamCredit

Vietnam Economy

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