Following an astounding 8.02-percent growth rate in 2022, Vietnam’s gross domestic product (GDP) growth is forecast to moderate at 6.5 percent this year and further expand at 6.8 percent in 2024, according to the Asian Development Outlook report released by the Asian Development Bank (ADB) on Tuesday.

Inflation is predicted to edge up 4.5 percent in 2023 before falling to 4.2 percent in 2024.

According to the ADB, Vietnam’s economic growth will be constrained in 2023 by the global economic slowdown, continued monetary tightening in advanced economies, and spillover from global geopolitical tensions.

"However, Vietnam’s growth support policy with monetary easing, a large amount of public investment to be disbursed in 2023, and the reopening of China will help the country counter these headwinds," said Andrew Jeffries, ADB country director for Vietnam.

Vietnam’s reduction of its regulatory interest rates by 0.5 to one percent from March 15 has made it the first economy in Southeast Asia to loosen monetary policies.

According to the ADB, the State Bank of Vietnam made the move because the difficult capital market has tightened credit for the real estate sector and weakened investor confidence.

The ADB report also showed that public investment will be another key driver for economic recovery and growth in 2023 and 2024, spurring construction and other related economic activities.

"Public spending is expected to generate substantial multiplier effects, creating a strong growth stimulus for the economy,” Jeffries said.

The Vietnamese government has been committed to disbursing US$30 billion this year with 90 percent of the amount allocated to ministries, agencies, and provinces as of January.

Starting March 15, tourist arrivals from China are expected to benefit tourism and services in Vietnam, with the sector forecast to grow eight percent this year. 

However, the ADB believed that the Vietnamese capital markets come under pressure.

Although the market turbulence has not yet caused serious systemic risks due to banks’ resilience, such risks are becoming evident.

The newly registered and disbursed foreign direct investment in the first two months of this year fell 38 and 4.9 percent, respectively, over the same period last year.

The fiscal deficit in 2023 may also exceed the target, which is 4.4 percent of GDP.

The ADB recommended Vietnam continue to sustain financial sector reforms to reduce the dependence of the economy on bank finance and enhance transparency in capital markets.

Like us on Facebook or  follow us on Twitter to get the latest news about Vietnam!