Drivers for growth in 2023

While consumption has shown signs of slowing down, attracting foreign investment with strong growth in realised capital but not yet recovering in newly registered capital, public investment will still be the main driver of economic growth in 2023.

It is forecasted that in 2023, there will be more challenges than opportunities, but Vietnam's economy still has a foundation to move towards a rather high growth rate of 6.5%, compared to the common level of the region and the world.

The good news at the beginning of the year

In the last days of 2022, businesses operating in the fields of agriculture, forestry and fishery export and tourism, travel and aviation, welcomed the good news that China opened its borders on January 8, 2023, after lowering the level of prevention and control of the COVID-19 epidemic. Because for the aviation and tourism industry, China is a key market.

Before the COVID-19 pandemic, there were about 600 flights per week between the two countries, connecting 48 destinations in China and five destinations in Vietnam, with a total transport capacity of 7.5 million passengers per year. The proportion of Chinese tourists accounted for more than 32% of the total number of international visitors to Vietnam while the proportion of flights to China accounted for about 25% of the exploitation volume of domestic airlines.

Since the outbreak of the Covid-19 epidemic, flights to and from China gradually decreased in frequency and closed from the beginning of 2020 until December 2022, only partially reopening with a frequency of more than 20 flights/per week.

National flag carrier Vietnam Airlines said that it has prepared the conditions to increase the frequency of flights to China as soon as this market opens because this is a traditional market, bringing great revenue for the firm. New airlines such as Vietravel Airlines have also planned to exploit this market.

Similarly, China's announcement of opening after the anti-epidemic changing direction also brings good news to exporters of agricultural, forestry and fishery products. According to Deputy General Director of Statistics Le Trung Hieu export growth in 2023 is forecasted to face many difficulties due to the decline in consumption of Vietnam's import markets, but it can be compensated by exploiting good opportunities coming from the implementation of new generation free trade agreements (FTAs).

The good news in the first days of the new year is that the Ministry of Transport started concurrently 12 projects of the eastern north-south expressway for the 2021-2025 period. This is the project most linked with provinces, cities, seaports, and airports, and is the most important economic corridor in the north-south transport axes of the country.

Opportunities in challenges

According to Dr. Vo Tri Thanh, a member of the National Financial-Monetary Policy Advisory Council, while consumption has shown signs of slowing down, attracting foreign investment with strong growth in realised capital but not yet recovering in newly registered capital, public investment will still be the main driver of economic growth in 2023.

The total capital from the state budget allocated for the whole year investment plan is more than 700 trillion VND, an increase of about 25 % (about 140 trillion VND) compared to the plan in 2022, and an increase of about 260 trillion VND compared to the plan in 2021.

Identifying the drivers for the growth target of 6.5% in 2023, Deputy General Director of Statistics Le Trung Hieu mentioned that the agriculture, forestry and fishery sectors continue to demonstrate the supporting role of the economy. These industries not only ensure the domestic food supply but also affirm their position as leading exporters of agricultural products, playing an important role in ensuring global food security.

It is noteworthy that at present, the consensus of banks to reduce interest rates and the smooth coordination process of the State Bank of Vietnam (SBV), is opening the expectation that the interest rate level will gradually cool down.

In addition, the Prime Minister also requested the SBV to promptly coordinate with ministries and sectors to remove difficulties and inadequacies, to effectively implement the interest rate support programme from the state budget, following Decree No.31/2022/ND-CP, on interest rate support from the state budget for loans of enterprises, cooperatives, business households and national target programs.

At the same time, the SBV will continue to direct credit institutions to reduce operating costs to reduce lending interest rates; to focus credit on production and business, especially in priority areas; control credit in risky areas, not to lack capital for the legitimate needs of people and businesses. This is information that is of great interest to the business community. Economists also predicted that interest rates will begin to decrease from the second quarter of 2023, and the situation will gradually become more favourable.