Vietnam's economy is predicted to grow strong in the next two years. (Photo: VNA)Hanoi (VNA) – The World Bank forecasts that Vietnam’s economy will grow 4.7% in 2023, and accelerate to 5.5% in 2024 and 6.0% in2025.
The bank made the prediction in its latest economic updateentitled “Making Public Investment Work for Growth” released on August 10.
The report said Vietnam’s economic growth slowed from 8% in 2022 to 3.7% in the first half of 2023, noting that a challenging external environment and weaker domestic demand is leading to a slowdown in economic growth in Vietnam. But the economy will pick up pace over the second half of this year, and the following years, it said.
Overall, investment will contribute 1.8 percentage points to the country’s GDP growth. Private investment is expected to decline slightlywith an increase of 4.3% compared to the same periodlast year dueto external uncertainties, and will contribute 1.2percentage points for GDP growth. Public investment is expected to be boosted,up 9.5% over the same period in 2022, contributing 0.6 percentage points togrowth. However, it can only partially offset the declining privateinvestment situation.
Due to loosened liquidity and the State Bank of Vietnam’s issuanceof the guidance on restructuring repayment terms, financial constraints for thereal estate and construction sectors are expected to be solved, which thus support privateinvestment to gradually recover from 2024 onwards.
The CPI is expected to increase slightly from an average of 3.1%in 2022 to an average of 3.5% in 2023. The deflationary impact of slowinggrowth and the policy of reducing value-added tax rates from 10% to 8% deployedin the second half of 2023 is enough to offset the 20.8% increase in civilservants salaries. CPI inflation will be stabilised at 3% in 2024 and 2025 onthe basis of the expectation that energy and commodity prices will be stable in2024.
World Bank releases its latest economic update entitled “Making Public Investment Work for Growth” on August 10. (Photo: VNA)Carolyn Turk, WB Country Director for Vietnam said that Vietnam’seconomy is being tested by internal and external factors, suggesting that to boost economicgrowth, the government can support aggregate demand through effective publicinvestments, thereby creating jobs, and stimulating economic activity.
“Beyond short-term support measures, the government should notlose sight of structural institutional reforms – including in the energy andbanking sectors – as they are imperative for long-term growth,” she said.
The report suggests policy options to get the economy back ontrack. Effectively implementing the 2023 investment budget can stimulateaggregate demand and economic growth. On exports, the report suggestsdiversifying product offerings and export destinations to build medium-termresilience against external shocks. Atthe same time, fiscal policy can play a stronger role in incentivizing greenpractices and consumption, ultimately contributing to environmentalsustainability.
A proactive fiscal policy supporting short-term demand, removing barriers to the implementation of public investment, and addressing infrastructure constraints can help the economy achieve these targets and promote long-term growth, the bank suggested.
The report’s special chapter studies Vietnam’s public investmentmanagement and how it can contribute to the goal of climbing the income ladder.To harness the power of public investment, the report recommends that Vietnamsustain its level of investment, improve the quality of the proposed project,and address deficiencies in public investment management and inter-governmentalfiscal institutions./.
