Vietnamese economy maintains recovery momentum

Vietnam saw positive macroeconomic indicators in January. One of the bright spots that continues to be mentioned is the inflow of foreign direct investment (FDI), with registered capital reaching 2.36 billion USD as of January 20, a year-on-year increase of 40.2%.

Foreign investors accelerate investment in Vietnam not only because of advantages in the business and investment environment, or factors related to the quality of human resources and incentives, but also thanks to the growth potential of an economy of 100 million people.

“In recent times, despite a complex global economy, Vietnam has shown resilience and flexibility. This is evident in the increasing European investment in the country, a testament to its economic strength. A prime example of this trend is Nestlé Vietnam's recent announcement of a 100 million USD expansion plan in Dong Nai. This highlights European confidence in Vietnam's economic stability," said Gabor Fluit, Chairman of the European Chamber of Commerce (EuroCham) in Vietnam at an event last month to launch its 2024 Whitebook.

The economy is recovering well, reflected through the 6.72% growth rate recorded in the fourth quarter of 2023.

Data of the General Statistics Office (GSO) show FDI attraction, industrial production, import-export revenue and retail sales all have reported positive growth. The index of industrial production (IIP) in January fell 4.4% month-on-month but still went up 18.3% year-on-year. In particular, the processing - manufacturing sector expanded 19.3% from a year earlier, contributing 15.1 percentage points to the overall growth.

Notably, the January IIP posted year-on-year increases in 60 provinces and cities while declining in just three others. Those recording high index rises in the processing - manufacturing sector include Quang Ninh province 157.9%, Bac Giang province 57.7%, Nam Dinh province 56.9%, and Vinh Long province 51.2%.

Vietnam's export earnings in January posted a year-on-year rise of 42% to about 33.6 billion USD – the highest monthly turnover since April 2022 when the figure stood at 33.26 billion USD, reported the Ministry of Industry and Trade (MoIT).

That contributed to last month’s total export and import value of more than 64 billion USD, rising by almost 38% year on year.

The strong export growth was driven mainly by the agro-forestry-fishery sector and the processing industry, which saw respective increases of nearly 97% and 38% in overseas shipments.

In particular, the export of telephones of all kinds and components brought home nearly 6 billion USD, surging over 56% month on month, partly thanks to Samsung’s launch of its new mobile phone series Samsung Galaxy S24 in mid-January.

Total retail sales of goods and revenue from consumer services in January were estimated at 524.1 trillion VND (21.47 billion USD), up 1.6% month-on-month and 8.1% year-on-year.

In the month, Vietnam welcomed over 1.5 million foreign tourist arrivals, up 10.3% month-on-month, and 73.6% year-on-year. The presence of a large number of international tourists also contributes to increasing the purchasing power of the economy.

The more positive both domestic and foreign sales are, the more motivation will be created for production and business. That is also one of the reasons why only in January 2024, there were 27,300 businesses entering and re-entering the market, of which the number of newly established ones was 13,500.

“International context” variable

Speaking at a meeting with development partners and foreign investors on the occasion of the Lunar New Year, Minister of Planning and Investment Nguyen Chi Dung once again emphasised that, after overcoming the headwinds in 2023, Vietnam's economy is entering 2024 - a year that is forecast to continue to have more difficulties and challenges than advantages.

An obvious example is that the IIP of January decreased compared to December 2023. Some localities still had low IIP growth rates in the processing and manufacturing industry, or even reported decreases, such as Bac Ninh (down 12.6%), Ca Mau (9.2%), and Lao Cai (2.3%).

In addition, the export of some key products continues to decline. The GSO statistics show that in the first half of January, textile and garment exports reached only 1.29 billion USD, down 17.8%; and that of machinery, equipment, tools and other spare parts was over 1.63 billion USD, down 4.6%.

The Central Institute for Economic Management (CIEM) recently forecast that Vietnam's GDP will grow by 6.13% in the first scenario and 6.48% in the second scenario with the entire year’s exports increasing by 4.02% and 5.19%, respectively. Both HSBC Vietnam and the Asian Development Bank (ADB) predicted Vietnam’s economy to grow by 6% in 2024, while the World Bank (WB) forecast the figure to be 5.5%.

However, opportunities for the economy remain big. Suan Teck Kin, Executive Director in Global Economics and Markets of the UOB Group, said he expects that this year, the country’s trade activities will improve and the semiconductor market will make a strong breakthrough.

The expected decrease in interest rates in the US will improve demand and many activities in Vietnam, and creates favourable conditions for exports and the manufacturing industry, he said, forecasting that the number of tourists to Vietnam in 2024 will increase as well.

Meanwhile, Ahmed Yeganeh, Country Head of Wholesale Banking at HSBC Vietnam, expected to see a recovery in trade activities with Vietnam's major trading partners in 2024, which will bring benefits for economic growth in the coming years.

He showed his belief that Vietnam has strong fundamentals to continue steady growth, although developments in the global economy affect the country.