Việt Nam's economic growth moderate in 2023 amid headwinds: ADB

April 05, 2023 - 07:00
With all factors considered, the economy is forecast to grow by 6.5 per cent in 2023 and 6.8 per cent in 2024. The growth would be supported by a sizable public investment, an expansionary monetary policy, and the reopening of China.


The construction site of the Trịnh Tường Bridge, a project under the Scheme to Upgrade Provincial Road No.156. ABD economists said public investment will be the key to economic recovery and growth in 2023 and 2024. VNA/VNS Photo Hồng Ninh

HÀ NỘI — A growth support policy with monetary easing, a large amount of public investment to be disbursed, and the reopening of China will help Việt Nam counter headwinds ahead, according to Andrew Jeffries, ADB Country Director for Việt Nam.

The director made the remarks at the Asian Development Outlook Press Conference on Tuesday.

He said 2023 will be a challenging year for Việt Nam as its economic growth would be constrained by the global slowdown, continued monetary tightening in developed countries, and the spillover from global geopolitical tensions.

The weakening global demand is expected to weigh on manufacturing, driving industrial growth to around 7.5 per cent, according to forecasts.

On the bright side, agricultural output is forecast to grow by 3.2 per cent on the back of revived domestic demand and the reopening of China, which accounts for 45 per cent of Vietnamese fruits and vegetables exports. 

Tourist arrivals from China starting in mid-March are expected to enormously benefit tourism and services, with the sector forecast to grow by 8.0 per cent.

"Public investment will be another key driver for economic recovery and growth in 2023 and 2024, spurring construction and other related economic activities," said Jeffries.

The capital markets have come under pressure but the market turbulence has not yet caused serious systemic risks due to banks' resilience.

In the long term, financial sector reform should be sustained to reduce the dependence of the economy on bank finance and enhance transparency in the capital markets.

Nguyễn Minh Cường, ADB Principal Country Economist for Việt Nam, said external headwinds would remain strong with continued contractionary monetary stances in advanced economies and high commodity prices worldwide, especially food prices.

The weakening global demand would dent domestic manufacturing activities, and lower exports and imports. The domestic financial markets would come under increasing pressure as bond repayments due in 2023 are estimated at US$10 billion, of which 42.8 per cent is from real estate.

Inflationary pressure would ease off as transportation's contribution to the Consumer Price Index has slid. However, housing and construction materials would keep going up, adding to the pressure. Inflation, therefore, was forecast to increase slightly to 4.5 per cent in 2023 and fall to 4.2 per cent in 2024. 

Revived tourism, new public investment and stimulus programmes initiated in 2022, and a salary boost in July, were expected to keep domestic consumption on the rise, though higher inflation might hamper recovery.

Both imports and exports were estimated to shrink by 7.0 per cent this year and the next. Slowing trade could create a current account deficit of 1.0 per cent of GDP in 2023 before moving back into surplus in 2024.

With all factors considered, the economy was forecast to grow by 6.5 per cent in 2023 and 6.8 per cent in 2024. The growth would be supported by a sizable public investment, an expansionary monetary policy, and the reopening of China.

"Around $30 billion of public investment is scheduled to be disbursed in 2023, which would boost GDP growth by about 1.0 per cent," said Cường. 

The economist also underlined several risks to the economic outlook, including a hard landing of the global economy following the turmoil in the global financial and banking sector, escalating global geopolitical tensions, and pandemic-exposed structural issues in the country. — VNS