VietnamCredit About Us Cafe€redit Contact Us
Go to cart
World Bank: Factors slowing Vietnam's economic growth

World Bank: Factors slowing Vietnam's economic growth

Tuesday 05, 09 2023
The difficult external environment and weak domestic demand are slowing down Vietnam's economic growth. However, the economy will accelerate in the second half of the year and the following years, according to the World Bank.

More risks to the economy

According to the World Bank, in the coming time, Vietnam will face more risks in the domestic market and abroad.

Specifically, from the outside, lower-than-expected growth in developed economies and China may continue to reduce external demand for Vietnam's export sector - whose size is estimated to be about 50% of GDP.

More risks to the economy

Along with that, prolonged uncertainties in the global financial market are likely to raise tensions in the global banking sector. This further makes investors avoid risks and discourage investment - including FDI investment in Vietnam.

Besides, stronger tightening of monetary policy in large-scale developed economies, in order to fight persistent inflation, can widen the interest rate difference between domestic and international markets. This could put pressure on the exchange rate for the local currency.

Furthermore, escalating geopolitical tensions and climate-related disasters could increase the downside risks for Vietnam, through rising food and fuel prices.

From a domestic perspective, according to the World Bank, the financial sector is facing increasing risks and vulnerabilities, requiring close monitoring and innovation.


This organization forecasts, Vietnam will grow at 4.7% this year, down sharply from 8% last year, then gradually increase to 5.5% in 2024, and reach 6.0% by 2025.

Recommended solutions

Ms. Carolyn Turk, Director of the World Bank in Vietnam, said that the Vietnamese economy is facing challenges from internal and external factors. To promote economic growth, the Government can support aggregate demand through effective public investment, thereby creating jobs and stimulating economic activity.

She also recommended that, in addition to short-term support measures, the Government should not ignore structural institutional reforms, including in the energy and banking sectors, as these sectors are imperative for long-term growth.

In its report, the World Bank emphasized that the economy facing difficulties due to weak aggregate demand and decelerating growth below potential requires proactive policy support.

World Bank

Firstly, because fiscal space is still abundant, fiscal policy needs to play a key role, ensuring that the investment budget in 2023 is implemented significantly better.

Accordingly, steps to accelerate and improve the efficiency of public investment deployment will help address emerging infrastructure constraints to serve growth, including urgent investment needs for power transmission networks, as well as improving resilience to climate change.

In addition to public investment, policies to support workers and affected households when the economy slows down, through improving the operational efficiency of the social security system, are also ways to support aggregate demand.

Second, support by fiscal policy should be implemented in parallel with further loosening of monetary policy, but there is not much room for further easing.

Third, a new wave of structural reforms needs to be implemented, to help improve productivity and sustainability of economic growth, and contribute to realizing the aspiration of becoming a high-income country by 2045.

In the medium term, according to the World Bank, fiscal policy can help improve the sustainability of Vietnam's economic growth.

For example, fiscal policy can help improve climate change resilience by encouraging green production and consumption. Carbon taxes and other fiscal tools, if implemented, could encourage industries to reduce carbon emissions, and adopt more sustainable practices.

At the same time, a term fiscal policy that promotes green consumption, such as tax incentives or subsidies for eco-friendly products, could be a way of encouraging individuals to choose products in an environmentally conscious way.

Source: World Bank, theleader

Compiled by VietnamCredit

Banking & Finance

You may also like

Banking system outlook stable: Moody's
Tuesday 24, 12 2019

Banking system outlook stable: Moody's

HA NOI (VNS) — The outlook for the Vietnamese banking system is stable,...
Integration Requires Reforms: Minister
Tuesday 24, 12 2019

Integration Requires Reforms: Minister

HA NOI (VNS) — There needs to be more improvement on administrative reform...
+84 981861066