Vietnam needs more impetus to achieve 6.5% growth target for 2023

Vietnam’s gross domestic product (GDP) grew 3.32% in the first quarter of this year, a 4-year low, according to the General Statistics Office. Foreign direct investment attraction and goods import and export, which used to see impressive continuous growth rates have fallen. Vietnam will need more impetus to achieve growth of 6.5% this year. The government has warned that geopolitical uncertainties may continue affecting Vietnam’s efforts to boost production and exports this year.

Vietnam’s slower growth in the first quarter showed that the economy was strongly affected by the global economic recession. Export turnover was 79 billion USD, down 12%. Import turnover was 75 billion USD, down 14.7%. And growth of the processing and manufacturing industries slowed.

Disappointing GDP growth reflected shortcomings in cash flow management that negatively affected the bond market and the construction and real estate sectors.

As of March 20, registered foreign investment capital totaled just 5.45 billion USD, down 39%, and realized FDI capital was 4.32 billion USD, down 2% from last year. This signals challenges to come because these sectors are always considered growth drivers of the economy.  

Nguyen Thi Huong, General Director of the General Statistics Office of Vietnam, said it won’t be easy to achieve the growth target set for whole economy in 2023.

“We would have to gain 7 to 7.5% in the remaining quarters amid the world economy’s unusual fluctuations, a drop in demand from importers, adverse weather, natural disasters, and armed conflicts,” Huong explained.   

However, economists say there remain bright spots. Although FDI has decreased, Vietnam continues to receive investment commitments from large global firms. Many European businesses are planning to shift investments to Vietnam. Vietnamese rice continues to maintain its global brand, which has helped stabilize domestic food security and macro-economy, and increase exports.

Dr. Le Duy Binh said, “The agro-forestry-fishery sector, for example, is still growing; the tourism industry is recovering, and investment capital is increasing, thanks to great efforts by the Government, investors, and contractors. Retail sales of consumer goods and services also grew.”

He added despite the decline of manufacturing and processing, the employment rate rose and the unemployment rate fell, showing that the casual economic sector can be a driver for processing, manufacturing, and other sectors.

Economist Tran Quy, Director of the Vietnam Institute of Digital Economy Development, called on the State to strengthen price management and improve competitiveness to control the price rise of products and services, thus reducing pressure on consumers and businesses.

“Businesses need to strengthen their competitiveness, optimize production processes, and improve product quality. But to that end, it’s necessary to boost digital transformation to reduce costs, and the state needs to support long-term economic growth by investing in infrastructure, education, technological development, and logistics. These are long-term solutions to reduce inflationary pressure,” Quy noted.

Nguyen Van Than, Chairman of the Vietnam Small and Medium-sized Enterprise Association, recommended, “Post-Covid policies, such as fiscal and banking policies, should continue to boost the vitality of businesses, especially small and medium-sized enterprises. The tourism sector should expand the policy of visa exemptions. Banks are on the right track in reducing interest rates, and should continue to ease debts and cut interest rates for priority industries.”  

International organizations say the current context is negatively impacting the Vietnamese economy. But if the Vietnamese Government is more flexible in price management, the production and business outcomes of the first quarter can be a foundation for Vietnam to achieve its growth target of 6.5% this year.