Viet Nam’s economy to post solid growth amid external uncertainties

Subdued global demand and high international interest rates impacted Viet Nam’s growth in 2023. However, a rapid switch to an accommodative monetary policy and sizeable public investment were among the key measures taken to sustain a growth recovery in 2023.

Source: ADB

A relatively broad-based restoration in export-led manufacturing and services, as well as stable performance of the agriculture sector are expected to support Viet Nam’s recovery momentum. Positive inflows of foreign direct investment (FDI) and remittances, a sustained trade surplus, recoveries in domestic consumption, and continued fiscal stimulus characterized by a substantial public investment program are seen as key to boosting growth in 2024.

“Viet Nam’s economy is expected to grow at a solid pace this year and the next, despite a challenging global environment,” said ADB Country Director for Viet Nam Shantanu Chakraborty. “However, global geopolitical uncertainties and domestic structural fragilities could impact the outlook. Therefore, policy measures in 2024 will need to combine short-term growth support measures to strengthen domestic demand with long-term structural remedies to promote sustainable growth.” 

Softened global demand caused by a slow economic recovery and delayed normalization of interest rates in the United States and other advanced economies, coupled with continued geopolitical tensions, are likely to hamper a full recovery of Viet Nam’s export-led growth in 2024. To accelerate growth, stronger measures are required to address domestic structural fragilities, such as heavy reliance on FDI-led manufacturing exports, weak linkages between manufacturing export industries and the rest of the economy, incipient capital markets, an overreliance on bank credit, and complex regulatory barriers to business.

Public investment remains a catalyst for Viet Nam’s economic growth, so its effective implementation is crucial. Although the government has applied various measures to expedite public investment and enhance effective execution, more systematic measures are required to improve legal and regulatory processes and so reduce constraints on efficient delivery./.