Vietnam’s economy is recovering quickly and impressively despite challenges, representatives of the World Bank (WB) and the International Monetary Fund (IMF) shared at a conference held on Monday.

“Vietnam’s economic growth in the second and third quarters is significant and the industrial field has showed dramatic growth," said Andrea Coppola, lead country economist at WB Vietnam.

"However, basic challenges will remain in the future.”

Francois Painchaud, resident representative of the IMF in Vietnam, threw his support behind the WB Vietnam representative’s view, adding that in July, it revised up its forecast for Vietnam’s economic growth.

Vietnam is the only country in Asia and ASEAN to see an upward forecast by the IMF.

In particular, the IMF raised Vietnam’s economic growth forecast to seven percent this year, lifting it by a full percentage point from three months earlier.

Vietnam needs reasonable fiscal policy

At the conference on maintaining macroeconomic stability, controlling inflation, promoting growth, and ensuring major balances of the economy chaired by Prime Minister Pham Minh Chinh in Hanoi on Monday, Coppola said amid the current global economy with rising inflation and the impact of the Russia-Ukraine military conflict, the growth of major economic partners of Vietnam has slowed down.

Meanwhile, inflation tends to increase in large economies in the world. Due to supply chain disruptions, energy supplies have also been depleted.

Coppola emphasized that Vietnam needs a proper fiscal policy. The country should balance policies to support the economic recovery while controlling inflation and volatilities of the economy. 

“We have to cope with changes in the global economy,” the WB’s representative said.

According to Coppola, the proper fiscal policy will help handle public investments, which should be used more effectively.

In the short term, it is necessary to effectively use support packages for economic recovery and development.

The recovery of the domestic market and demand is important to cushion the impact of price hikes.

However, Vietnam still faces inflation risk. If inflation exceeds four percent, the State Bank of Vietnam must tighten its control over interest rates.

Fiscal and monetary policies can drive the market, so changes should be made to promote the efficiency of monetary policies and improve the economy’s liquidity.

In addition to improving the local investment environment, Vietnam’s workforce quality should be improved as well.

Vietnam is recovering well

Speaking at the conference, Painchaud from the Resident Representative Office of the IMF in Vietnam said that anti-COVID-19 policies had helped the Southeast Asian nation maintain a low death rate and stabilize the banking and finance sector, which were difficult jobs.

Regarding external factors affecting Vietnam, Painchaud said the world is facing risks of inflation and economic crises.

However, Vietnam has so far recovered well. The removal of restrictions, the COVID-19 vaccination, and socioeconomic recovery and development programs have been conducted effectively, resulting in the restoration of sectors, such as tourism.

“We have reduced our forecast [for Vietnam’s economic growth] to 6.7 percent in 2023 due to the high growth rate so far this year, but the rate is still well above those of other regions and countries, especially countries in Asia,” Painchaud noted.

Vietnam’s inflation is under control. The central bank has made efforts to lower inflation and stabilize the macro-economy while strictly managing financial conditions.

Vietnam’s credit expanded. The country’s gross domestic product (GDP) increased sharply as well.

It is one of the 20 percent of countries and territories in the world posting GDP growth, but GDP remains low, as per regional standards. 

Vietnam has still encountered capital-related issues. The central bank should enhance the management of the banking system by cautious policies to develop the capital market sustainably, the IMF representative said.

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