Andrea Coppola, World Bank Lead Economist for Vietnam (Photo: VNA)Hanoi (VNA) - Andrea Coppola, World Bank LeadEconomist for Vietnam speaks to Vietnam News Agency about his recommendationsfor the country to speed up economic recovery and development in the time tocome.
VNA: How does the World Bank assess Vietnam’s recenteconomic performance? What is the forecast for Vietnam’s economy amidst currentglobal and domestic challenges in the second half of 2023 and beyond?
AndreaCoppola: Vietnam hada very strong economic performance in 2022 driven by three factors: robust exports,strong private consumption and also low base effects given the slower economicgrowth registered in 2021.
However, during the last part of 2022, Vietnam’s economystarted to face external headwinds. Weakening global demand associated with themonetary tightening that we observed in many countries in 2022 started havingan impact on Vietnamese exports.
As a result, economic growth decelerated during the firstquarter of 2023 to 3.3% as weaker external demand had an impact onexport-oriented manufacturing which contracted by 0.4% in Q1.
Overall, external headwinds will have an impact on economicgrowth in Vietnam in 2023 which is expected to moderate. Our latest projectionsshow the economy growing by 6% in 2023 but there are significant downside risksto the outlook.
Vietnam’s GDP grows at 8.02% in 2022, the fastest pace over the past 25 years, backed by retail sales, investment, and exports (Photo: VNA)VNA: How effectivehave Vietnam’s measures, such as belt-tightening practices and a 2% VATreduction, been in addressing economic difficulties? What specificrecommendations does the World Bank have to accelerate Vietnam’s economic recoveryand development?
Coppola: The 2% VAT reduction can help topromote domestic consumption but more measures may be needed to sustaineconomic growth. Monetary policy has the difficult task to support economicactivity while controlling inflation and managing exchange rate pressures.
TheState Bank of Vietnam has been cutting policy rates in 2023 which helps topromote economic growth but it will be important during the next months tomonitor the possible impact and pressures on capital flows and exchange ratecreated by the increasing distance between interest rates in Vietnam andabroad. It will also be important to closely monitor inflation dynamics.
In terms of fiscal policy, an option may be to leveragepublic investments to promote growth. Despite large investment needs to promotegrowth and to increase resilience to shocks, public investments in Vietnam havebeen decreasing during the last years. Moreover, there is an issue ofunder-execution to be addressed and also some question marks about theefficiency of investments.
To promote growth, not only short-term growth but also longer-termgrowth, more efficient and more significant public investments could be part ofthe solution.
Exports, investments and consumptions are considered the key drivers of Vietnam's economic growth in 2023 and beyond (Photo: VNA)VNA: What is youropinion on the Vietnamese Prime Minister’s emphasis on export, investment, andconsumption as drivers of economic growth? How can the World Bank supportVietnam in achieving its economic objectives?
Coppola: Export, investment and consumptionare the pillars of external and domestic demand, respectively. The performance ofeach one of these three components of aggregate demand will have a directimpact on Vietnam’s economic growth.
The challenge with exports is that they are significantlyaffected by external factors such as the demand from trade partners in US andin Europe. Private consumption is very important, and it was a key driver ofgrowth in 2022.
Investments in my opinion are key. They are key not only foreconomic growth in 2023, or 2024, or 2025. They are key to achieve Vietnam's ambitions to become a high-income economy by 2045 in a context characterised bythe challenges associated with climate changes.
Investment needs are large. The Country Climate andDevelopment Report that the World Bank prepared for Vietnam estimates that inorder to address climate change adaptation and mitigation challenges, Vietnamwill require additional investments of about 6.8% of GDP per year, eachyear, between now and 2040.
The World Bank supports Vietnam in achieving its developmentobjectives through the provision of three kind of services: first, lendingservices, to help Vietnam addressing its financing needs; second, analyticalservices, to support Vietnam to identify effective reforms and technicalsolutions that can help addressing its development challenges in a fastevolving world; third, convening services, to bring to Vietnam internationalexpertise and best practices from other countries to promote knowledge exchangeand support Vietnam achieving its economic and development ambitions./.
