Higher GDP forecasts on robust economic recovery and new growth drivers

Bike production at Thống Nhất Company Limited. Recent forecasts are optimistic about the Vietnamese economy in 2024 with the gross domestic product (GDP) growth rate poised to reach around 7 per cent for the full year. — VNA/VNS Photo Trần Việt

Recent forecasts are optimistic about the Vietnamese economy in 2024 with the gross domestic product (GDP) growth rate poised to reach around 7 per cent for the full year, higher than the National Assembly’s target set at 6.5 per cent.

The Central Institute for Economic Management (CIEM) on Tuesday lifted its growth forecast for the Vietnamese economy from 6.48 per cent to 6.95 per cent, in the context of a robust global economic recovery.

CIEM’s Director Nguyễn Hồng Minh said at a conference discussing new drivers for quality growth, that Việt Nam’s socio-economic development achieved impressive results in the first half of this year, prioritising stabilising the macroeconomy, controlling inflation and ensuring major balances.

GDP expanded at 6.42 per cent in January-June, inflation was under control, exports and inflows of foreign direct investment (FDI) were robust. “More important, Việt Nam is considered a spotlight of reform and economic integration,” Minh said.

“Economic restructuring, regional economic development, improving business environment, enhancing labour productivity together with digital and green transitions are becoming bold policies.”

Nguyễn Anh Dương, Head of the CIEM’s General Research Department, said that the prospect of Việt Nam's economic growth was positive compared to other countries in the region.

The CIEM has provided two scenarios for GDP growth in 2024.

In the first scenario, GDP growth is forecast to reach 6.55 per cent in 2024 with exports to increase by 9.54 per cent, CPI at 4.31 per cent and trade balance to record a surplus of US$5.7 billion.

Dương said that the first scenario was built on the context the global economy develops following projections of international organisations and Việt Nam maintains similar policies as in the first half of the year.

In the second scenario, GDP growth can reach 6.95 per cent if the global economy sees more rapid recovery, internationals increase investments in Southeast Asia, including Việt Nam and investments in digital and green transitions see positive developments. In this context, exports will increase by 11.64 per cent over 2023, CPI at 4.12 per cent and trade surplus at $7.3 billion.

"To reach the GDP growth rate of 6.95 per cent, Việt Nam needs to effectively implement reforms and economic management policies to maximise the efficiency of public investment disbursement and credit absorption, improve labour productivity, enhance business environment and the national competitiveness, Dương said.

Greater efforts should be made to increase the quality of growth, the capacity of innovation and adaptation to major trends such as digital transformation and green transition, enhance labour productivity and complete the legal framework for new economic models like circular economy, digital economy, sharing economy and innovative economy, he said.

Adding that close watch must be kept on inflation developments, especially impacts of wage increases and price increases of State-managed products, to maintain room for fiscal policies in case there are external shocks.

7% GDP growth target?

After impressive economic growth in the first half of this year, the Ministry of Planning and Investment recently proposed to the Government a growth scenario for the full year to 6.5-7 per cent, instead of 6-6.5 per cent target set in the Government’s Resolution No 01.

The ministry raised two growth scenarios with GDP to reach 6.5 per cent and 7 per cent, respectively.

The ministry boldly proposed the Government strive for the target of 7 per cent or higher on positive growths of economic sectors, more rapid recovery of private investment, State-owned enterprises, positive growth momentum of foreign direct investment (FDI), robust exports, improving tourism and consumption and new policies, urging more drastic policies.

Minister of Planning and Investment Nguyễn Chí Dũng said that the early enforcement of the Law on Land, Law on Real Estate Business and Law on Housing would create favourable conditions for the property market to recover in the second half of this year, which would positively affect economic growth.

Meanwhile, most international organisations' projections put the expansion of the Vietnamese economy at around 6 per cent this year.

According to José Viñals, group chairman of Standard Chartered, the Vietnamese economy will perform better this year to reach a GDP growth rate of 6 per cent in the second half, leading to an overall yearly rate of 6 per cent.

“Relative to most other economies, a 6 per cent growth rate is quite impressive, nearly double the global rate and higher than emerging markets, which are expected to grow around 4 per cent this year. This places Việt Nam among the top growth economies globally, which is something to be happy about,” he said.

The Singaporean-based United Overseas Bank (UOB)'s Global Economics & Market Research Unit earlier this month maintained its growth forecast for Việt Nam at 6 per cent for 2024.

The International Monetary Fund (IMF) projects the Vietnamese economy to expand by close to 6 per cent in 2024, driven by a recovering export sector, robust foreign direct investment and policy support.

However, downside risks are high, the IMF warned.

“Exports, a key driver for Việt Nam’s economy, could weaken if global growth disappoints, global geopolitical tensions persist, or trade disputes intensify. Domestically, persistent weakness in the real estate sector and corporate bond market could weigh more than expected on banks’ ability to expand credit and hurt economic growth and undermine financial stability. Given easy monetary conditions, if exchange rate pressures were to persist for longer it could lead to a larger pass-through to domestic inflation,” the IMF wrote.

To sustain high economic growth amid less-favorable demographics and climate change challenges, Việt Nam needs a new wave of reforms, according to the IMF.

“Increasing productivity, further investing in human and physical capital and incentivising private investment in renewable energy is key. Improving the functioning of the capital markets would also help boost productivity. In this regard, developing a market-based sovereign bond market is vital to facilitate broader capital market development and to make monetary policy transmission more effective.”