Vietnam's economic prospects for 2024 are cautiously optimistic: Expert
The key drivers of Vietnam's growth in 2024 are anticipated to be public investment, consumer spending, and import-export recovery.
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| Vietnam's economy possesses a solid foundation and strategic momentum to continue growing in 2024. (Illustration image - Photo: Vietnam Insisder) |
In an interview with The World & Vietnam Report, Dr. Phan Thanh Chung, Lecturer of Economics, The Business School, RMIT University Vietnam, said that financial institutions such as the IMF or HSBC have positive comments on growth. Vietnam's economy 2024 is based on reform efforts, the economy's strategic position in the global supply chain and a strong domestic market.
What do you think about the overall performance and growth of Vietnam's economy in 2023?
In 2023, Vietnam's economy demonstrated resilience and is set to achieve 5,05% GDP growth, somewhat below its 6.5% target but still impressive globally.
The country has maintained macroeconomic stability, effectively managing inflation and public debt. Despite global inflationary pressures, the Consumer Price Index (CPI) rose by only 3.25% in 2023. The effectiveness of the country's monetary and fiscal policies was evident, notably through various tax relief measures and interest rate cuts, which supported businesses and bolstered economic stability.
Public investment disbursement saw a significant rise, with about 549.1 trillion VND disbursed from the state budget in the first eleven months, marking a 22.1% increase from the previous year. This increase in public investment, particularly in infrastructure, has played a crucial role in facilitating economic growth.
Foreign direct investment (FDI) inflows into Vietnam have been a major growth stimulus, underscoring the country's continued attractiveness as an investment destination despite a global slowdown. In 2023, FDI into Vietnam will reach a record of 36.6 billion USD, an increase of 32.1% over the previous year. This robust FDI performance can be attributed to increased investment from major partners like Singapore, China, and Japan, as well as proactive government policies that supported business operations and improved the investment climate.
Furthermore, Vietnam's deepening integration into global value chains through various free trade agreements (FTAs) has contributed to this success. The FDI influx has not only brought capital but also facilitated technology transfer, managerial expertise, and integration into global markets, contributing significantly to economic diversification, job creation, and technological advancement.
In addition, Vietnam's international relations, especially its upgraded partnership with the United States, have opened new avenues for economic, trade, and investment opportunities, further enhancing its global standing and economic prospects.
The agriculture, forestry, and fishery sectors have significantly contributed to the economy, with Vietnam being a major exporter of commodities like rice, coffee, and seafood. The growth in these sectors is attributed to improvements in both quantity and quality of the products.
Additionally, technological advancements, particularly in manufacturing and digital services, have contributed to the economy by moving towards higher value-added industries.
Alongside the bright spots, what do you think have been the weaknesses, difficulties and challenges for the Vietnamese economy in the past year? What should the Government agencies and business community do to mitigate these weaknesses and difficulties?
A key challenge was moderate growth in the services sector, which had previously been a significant contributor to the economy's expansion. This slowdown in services growth, coupled with global economic uncertainties, posed a considerable challenge to maintaining the momentum gained in the previous years.
The global economic climate, marked by uncertainties and potential slowdowns, also impacted Vietnam's export-driven economy, presenting additional hurdles in sustaining growth rates.
To mitigate these challenges, the Vietnamese government and business community need to adopt a multifaceted approach. Diversifying the economy, especially beyond the services sector, could be crucial. This involves promoting other sectors like manufacturing, technology, and agriculture, which could provide new growth avenues.
Enhancing the business environment to attract more FDI and support local businesses is also essential. The Government could focus on policy reforms that reduce red tape, provide fiscal incentives, and improve the ease of doing business.
Additionally, strengthening the domestic market and consumer base could help offset some of the vulnerabilities to global economic fluctuations. Through these measures, Vietnam can aim to maintain its growth trajectory and address the challenges it faces.
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| Dr. Phan Thanh Chung, Lecturer of Economics, The Business School, RMIT University Vietnam. (Photo: MN) |
2024 is forecast to be another difficult year for the global economy, and Vietnam is not exempted. What do you think about Vietnam's economic prospects in 2024? What will be the growth drivers?
Vietnam's economic prospects for 2024 are cautiously optimistic, with several forecasts indicating a feasible GDP growth target of around 6%.
The IMF predicts a growth of 5.8% for Vietnam in 2024, placing it among the top 20 highest growth rates globally. HSBC's forecast suggests a significant increase to 6.3% in 2024, highlighting Vietnam's potential to outperform many international counterparts.
These positive outlooks are based on Vietnam's ongoing economic reforms, its strategic position in global supply chains, and its robust domestic market. However, it's important to note that global economic uncertainties might pose challenges, thus making these forecasts subject to potential adjustments based on global economic trends and domestic policy effectiveness.
The key drivers of Vietnam's growth in 2024 are anticipated to be public investment, consumer spending, and import-export recovery.
Public investment is likely to continue playing a crucial role in stimulating economic activity, particularly in infrastructure and key development projects. Consumer spending, led by a growing middle class and increasing disposable income, is expected to drive domestic demand. Moreover, the recovery in import-export activities, supported by Vietnam's participation in various FTA and its strategic position in global supply chains, will contribute significantly to economic growth. The country's focus on diversifying its export markets and products will also be instrumental in mitigating risks associated with global economic fluctuations.
In addition to these factors, Vietnam's continuous efforts in improving its business environment, attracting FDI, and investing in technology and innovation are likely to further bolster its economic resilience and growth. Therefore, while challenges are expected due to the global economic scenario, Vietnam's economy has strong foundations and strategic drivers that position it for continued growth in 2024.
In this context, what recommendations do you have for the Government authorities and business community to unlock resources, leverage advantages, and develop sustainably?
To achieve its 2024 goals, Vietnam should adopt a flexible approach, drawing on global examples for inspiration.
Akin to the European Central Bank's approach, Vietnam should closely monitor international economic trends to tailor its macroeconomic policies effectively, focusing on balancing inflation control and growth. This includes strategically adjusting interest rates and exchange rates.
In addition, a blend of public investment, FDI, and private investment, similar to Singapore's investment strategy, should be utilized to balance the budget and foster growth.
Economic growth should be stimulated through both traditional means, like public investment in infrastructure projects similar to the Ho Chi Minh City Metro, and new drivers such as the digital economy, drawing inspiration from programs like Estonia's e-residency program.
Following Canada's example, Vietnam should maintain a balance between monetary, fiscal, and macroeconomic policies to support sustainable growth and stability.
Moreover, in supporting businesses impacted by reduced exports and investments, Vietnam can enhance the utilization of trade agreements, taking a page out of Republic of Korea's playbook, and promote administrative reforms reminiscent of New Zealand's streamlined business processes.
Restructuring the economy should focus on state-owned enterprises and financial institutions, drawing inspiration from China's efficiency-enhancing reforms.
Besides, developing strategies to enhance economic resilience and independence in response to global changes is crucial, similar to Japan's post-Fukushima energy diversification.
Finally, improving the economy's productivity, quality, and competitiveness through developing various market types and integrating domestic and international markets, as seen in Germany’s Industry 4.0 strategy, will be vital for Vietnam’s sustained growth and stability amidst global integration.
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