ADB Country Director for Vietnam Shantanu Chakraborty (Photo: VNA) The bank's September report forecast that Vietnam's economicrecovery would pick up in the near term on the back of strong domesticconsumption, moderate inflation, acceleration of public investment, andimproved trade activities.
The ADB remains very confident that Vietnam will be able to achieve an overallannual growth of 5.8% for 2023, Chakraborty said in an interview with the Vietnam News Agency about the economic outlook and the premises for the projections.
“This is premised upon early signs of upticks in theservices industry and in the construction industry. We are also seeing growthin the agricultural sector, given the robust stability that has been shown inagricultural prices. So, there are some drivers of the economy that we believewill contribute towards Vietnam achieving its 5.8% economic growth, despitesluggish growth in the first couple of quarters.”
“I believe maintaining the momentum of public investmentwill be crucial because that is what is going to rejuvenate economic activities,generate employment, and put more money in the hands of people to enhancedomestic consumption.”
He went on noting that the monetary and fiscal policiesadopted by the government up until now have really facilitated keepinginflation under control.
The ADB’s current projection of inflation in Vietnam is 3.8% for2023, and 4% for 2024, he unveiled, stressing certain challenges in terms ofthe global increasing interest rates, the disruptions caused by certaingeopolitical events, and the monetary tightening in some countries.
“But overall, given the stability of agricultural productionin the country so far, and the fact that oil and gas prices are expected toremain stable for the rest of the year, I strongly believe that, based on thelow inflation rates that were experienced by Vietnam in the first half of theyear, overall inflation of 3.8% is very much achievable.”
Regarding the key growth drivers of the economy in 2024, theCountry Director put public investment as number one. By some estimates, thereis about 30 billion USD of public investment that has been planned, so aconcerted effort needs to be made to expedite spending the money. That willreally boost demand in the market, lead to employment generation, and fosteroverall economic activities.
Underscoring the importance of consumption, he said giventhat inflation is now low and there is liquidity in the hands of people,domestic consumption needs to remain strong to offset the adverse impact ofexport-related activities.
Concerning high interest rates in Vietnam's key tradingpartners that have depressed the demand for Vietnamese exports, he suggested thecountry continue to look for new niches where it can provide more value-addedservices, and try to diversify its export commodity base to more sectors so itcan maintain its competitive edge in the international market. More importantly,Vietnam should improve its competitiveness by streamlining its cost structure.And for that, the government plays a big role in terms of ensuring certaintyfor export-oriented private sector investors to come to the nation and haveaccess to a stable enabling environment and strong infrastructure.
“Those are some of the steps that Vietnam can take todiversify this product base and move up the value chain to actually offer morevalue-added services to the international market, alleviating the challenges thatwill be faced by the export sector.”
Pointing to current public debt to GDP of about 38% and thestipulated target that the government has set for itself within a 60% range, Chakrabortynoted there is a significant amount of fiscal headroom that the government candeploy, by borrowing more and spending on public investment.
“I see this as a strong opportunity to really push theagenda to spending on infrastructure and the social sector, including providingbenefits for unemployment and initiating VAT cuts. I would suggest thegovernment expedite the rollout of VAT cuts, and also extend their tenor to theend of 2024 to reinvigorate domestic consumption.”/.
VNA
