Việt Nam's economy set for a comeback: IMF

Việt Nam's real GDP is expected to grow at 4.7 per cent this year, according to the October 2023 report by the International Monetary Fund (IMF) on Asia and the Pacific region. IMF's projection for Việt Nam's real GDP growth for 2024 and 2025 were 5.8 per cent and 6.9 per cent, respectively.

Việt Nam's real GDP is expected to grow at 4.7 per cent this year, according to the October 2023 report by the International Monetary Fund (IMF) on the Asia-Pacific region. IMF's projection for Việt Nam's real GDP growth for 2024 and 2025 were 5.8 per cent and 6.9 per cent, respectively.

The Southeast Asian economy's economic performance this year has put it in a middle-of-the-pack position, behind major economies such as China (5 per cent), and India (6.3 per cent) but ahead of peer economies such as Malaysia (4.0 per cent) and Thailand (2.7 per cent).

According to the IMF, Việt Nam's effort to put inflation under control has been a success as the country's headline inflation has been only slightly higher than before the pandemic period, without clear troughs or peaks, especially in comparison to rising inflation in more advanced economies in the region such as Australia, Japan, South Korea, New Zealand, and Singapore.

Overall, inflation outcomes have been on average lower than in other regions thanks to the region's central banks' easing and then tightening of monetary policies. Inflation has also been higher in most of the region’s advanced economies than in emerging markets.

The report stated economic activity in the Asia-Pacific region remains on track to contribute around two-thirds of global growth in 2023, despite a challenging environment shaped by a global demand rotation from goods to services and synchronised monetary tightening. Upside growth surprises in the first half of 2023 have been driven by robust domestic demand, reflecting in part a draw-down in excess savings, and by China’s reopening after the pandemic.

"However, growth momentum is slowing, with China’s reopening losing steam and lacklustre investment, partly responding to weaker external demand. Headline inflation has declined from post-pandemic peaks as global commodity prices have receded," said the report.

Meanwhile, a weaker-than-expected recovery in China could trigger negative spillovers to its trading partners. Abrupt financial tightening in the United States or within the region would inhibit growth, especially in highly leveraged economies and sectors. The recent slowdown in China’s property sector will weigh on demand throughout the region with medium-term growth being projected to be moderate.

On the upside, a soft landing — with a better outlook for manufacturing and capital expenditures, an earlier turning point of the technology cycle, and accelerated disinflation in Asia — is becoming more plausible and would provide scope for easing monetary policy in 2024, according to the report.

The IMF advised central banks to carry through with policies to ensure that inflation is durably at appropriate targets.

"As tight monetary conditions can place strains on financial stability, strengthening financial supervision, vigilant monitoring of systemic risks, and modernising resolution frameworks are critical. Credible medium-term fiscal frameworks and consolidation could safeguard budgetary room for manoeuvre and debt sustainability," said the report.