ADB maintains 6% growth forecast for Vietnam's economy

The Asian Development Bank (ADB) has maintained its earlier growth projection for Vietnam this year despite lingering uncertainties in the external environment. Vietnam’s economy is expected to grow at 6.0% and 6.2% in 2024 and 2025, respectively, heard a conference held in Hanoi on April 11.

At the event, Nguyen Ba Hung, ADB Chief Economist in Vietnam, said slowing global demand and high international interest rates have impacted Vietnam's growth in 2023. However, the rapid shift to pro-growth monetary policy and large-scale public investment is one of the key measures taken to sustain growth recovery.

A relatively broad-based restoration in export-led manufacturing and services and the stable performance of the agriculture sector are expected to support Vietnam’s recovery momentum. Positive inflows of foreign direct investment (FDI) and remittances, a sustained trade surplus, recoveries in domestic consumption, and continued fiscal stimulus characterised by a substantial public investment programme are seen as key to boosting growth in 2024.

ADB Country Director for Viet Nam Shantanu Chakraborty said that Vietnam’s is expected to grow at a solid pace this year and the next, despite a challenging global environment. However, global geopolitical uncertainties and domestic structural fragilities could impact the outlook. Therefore, policy measures in 2024 will need to combine short-term growth support measures to strengthen domestic demand with long-term structural remedies to promote sustainable growth.

Softened global demand caused by a slow economic recovery and delayed normalisation of interest rates in the US and other advanced economies, coupled with continued geopolitical tensions, are likely to hamper a full recovery of Vietnam’s export-led growth in 2024.

To accelerate growth, stronger measures are required to address domestic structural fragilities, such as heavy reliance on FDI-led manufacturing exports, weak linkages between manufacturing export industries and the rest of the economy, incipient capital markets, an overreliance on bank credit, and complex regulatory barriers to business.

Public investment remains a catalyst for Vietnam’s economic growth, so its effective implementation is crucial. Although the Government has applied various measures to expedite public investment and enhance effective execution, more systematic measures are required to improve legal and regulatory processes and reduce constraints on efficient delivery.