Viet Nam's economy remains resilient amid weakening global demand

Viet Nam’s economic growth is expected to slow down to 5.8% in 2023 and 6.0% in 2024, compared to the April 2023 forecast of 6.5% and 6.8% respectively, mainly due to weak external demand, according to a report by the Asian Development Bank (ADB) released on September 27th 2023.

The Asian Development Outlook (ADO) September 2023 noted that the main forces impacting the economy have been the global economic slowdown, monetary tightening in some advanced countries, and the disruption caused by exacerbated geopolitical tensions. Inflation forecasts are revised down to 3.8% from 4.5% for 2023 and 4.0% from 4.2% for 2024.

“Weak external environment, including from a subdued recovery in the People’s Republic of China, has hampered export-led manufacturing, thus shrinking industrial production in Viet Nam,” said ADB Country Director for Viet Nam Shantanu Chakraborty. “However, the economy remains resilient, and recovery is expected to pick up in the near term, driven by strong domestic consumption, which is supported by moderate inflation, an acceleration of public investment, and improved trade activities.”

While Viet Nam’s industrial production is shrinking due to falling global demand, other sectors are forecast to display healthy growth. Services are expected to continue expanding, supported by a revival in tourism and the recovery of associated services. Agriculture will benefit from rising food prices, and it is expected to expand by 3.2% in 2023 and the next year.

The report also highlighted significant risks to the outlook. Internally, slow disbursements of public investment and structural weaknesses in the real economy are the main downside risks to the economy.

Externally, a substantial slowdown in global growth and weak recovery in the PRC remain risks to the economic outlook. Sustained high interest rates in the US and Europe and a stronger US dollar may lead to further challenges to the recovery of external demand, and weaknesses in the dong exchange rate.