Efforts exerted to promote sustainable growth

The difficulties of the economy were revealed in the first quarter of 2023. However, the growth prospect of the Vietnamese economy will recover strongly in the second half of 2023. Facing the general difficulties of the global economy, the growth dynamics of the Vietnamese economy have changed.

For the first time after many years of growth, driven by the industrial sector, in the first quarter of 2023, the economy's growth will mainly come from the service sector and agriculture, forestry and fishery. These two sectors contributed 95.91% and 8.85% respectively to the overall growth.

Expectations of public investment, tourism breakthrough

Notably, the growth of the service sector has accelerated, thanks to the revival of the international visitor market. In the first quarter of 2023, international visitors to Vietnam were estimated at nearly 2.7 million arrivals, 29.7 times higher than the same period last year.

Although international tourists to Vietnam are only 60% of what they were before the COVID-19 pandemic, the recovery of this sector is important because tourism is an integrated economic sector that has an impact on many other fields, such as transportation, accommodation, restaurants, art, and entertainment. Spending by international tourists brings the main revenue for the tourism industry and is also a part of the calculation of export services of Vietnam.

The growth forecast of the service sector continues to be a bright spot in the coming quarters, as the Chinese market has opened up to tourist groups in Vietnam, since mid-March.

Moreover, the visa "bottleneck" is also being removed when the Government proposes to include, in the General Resolution of the National Assembly at the 5th session (May 2023), several new points on immigration management policies such as: Issuing electronic visas for citizens from all countries and territories; increasing the duration of the e-visa from 30 days to three months; increase the time limit for granting temporary residence certificates at border gates for people on entry from 15 days to 45 days.

With these new points, the Vietnam National Administration of Tourism assesses that the goal of welcoming eight million international visitors this year is feasible, making an important contribution to the overall growth of the economy.

One of the drivers for economic growth in the coming quarters is public investment. Le Trung Hieu, Deputy Director General of the General Statistics Office said, that 2023 is the time for medium-term public investment, as well as the infrastructure development package in the post-pandemic socio-economic development recovery programme.

After a period of project preparation and investment procedures, many large projects have completed the preparations to move to the implementation phase, promoting the disbursement of public investment capital. This is also the last year of the Socio-Economic Development and Recovery Programme, so the public investment is likely to make a breakthrough.

Public investment will make a great contribution to the accumulation of fixed assets and movable assets, which is one of the growth engines that the Government has made a lot of efforts and measures to promote and become a driving force for growth in 2023 and the remaining quarters, said Le Trung Hieu, Deputy Director General of the General Statistics Office.

In the updated report on reviewing Vietnam's economic outlook in March 2023, the World Bank (WB) in Vietnam also stated that although there are many challenges, unlike many other countries, Vietnam still has room to take measures to promote growth.

In particular, the effective implementation of key public investment projects is key to growth, in both the short and long term. At the same time, fiscal and monetary policies must be synchronised to support the economy and ensure effective macroeconomic stability.

Strengthening export momentum

To achieve the target of 6.5% annual growth, it is necessary to have solutions to strengthen the main growth engine of the economy, which is the industrial production sector and export activities.

In the first quarter of 2023, the industrial sector grew by negative 0.82%, reducing 0.28 percentage points in overall growth. Difficulties in industrial production, especially in the processing and manufacturing industries, have been caused by the decrease in orders from export enterprises.

The balance of trade in goods in the first quarter of the year still maintained a surplus with a trade surplus of more than 4 billion USD, higher than in 2021 and 2022, but export activities in 2023 faced many difficulties, due to the volatile situation of the world economy, high inflation in many major economies and increased trade protectionism by importing countries.

To improve export activities in the coming time, relevant parties should continue to make good use of trade agreements (FTAs) and make efforts to promote trade in new markets; as well as closely monitor developments of the world economy, especially the policies of major economies such as the US, China, the EU, and Japan.

It is also necessary to promote diversified product lines to reduce dependence on traditional markets; improve efficiency and regulate the speed of customs clearance of import and export goods, at the border gates between Vietnam and China, especially for seasonal agricultural and aquatic products.

According to Dr. Can Van Luc, Chief Economist of the Bank for Investment and Development of Vietnam (BIDV), the ministries of Finance, Industry and Trade, Planning and Investment, need to coordinate with units to implement solutions to support businesses that are negatively affected by the decline in exports and investment.

More measures should be devised to promote the substantive improvement of the business investment environment, simplify administrative procedures, and drastically remove major obstacles for businesses, especially in terms of procedures related to land and access to capital, he added.

Given that Vietnam still has a lot of room to implement growth-promoting measures, WB experts in Vietnam recommended that the Government need policy reforms to unlock the potential of the service sector, to contribute to the sustainable growth of the economy. Priority actions should focus on removing barriers to foreign trade and investment in this sector and implementing reforms to promote competition and financial access for domestic firms.

It is necessary to focus on services that can drive further growth in sectors with plenty of room, such as manufacturing; encourage step-by-step innovation in products and processes at the enterprise level and adoption of existing technologies, including digital technology; strengthen the working skills and capacity of employees and managers.

Analyzing a series of data in recent years, the General Statistics Office said that normally, the GDP growth rate in the first quarter is very low. It will start to recover in the second quarter and make a breakthrough in the second half of the year.

This rule will likely continue to happen in 2023 because the foundation for rapid growth recovery is that major balances of the economy are still maintained, inflation is under control, and the supply of energy, food and raw materials for production has been stable.