Vietnam’s economic growth to reach 6.5% in 2023: ADB

After a strong performance in 2022, Vietnam’s economic growth is expected to moderate at 6.5% this year and further expand at 6.8% in 2024, according to the Asian Development Bank (ADB).

The ADB announced the Asian Development Outlook (ADO) in Hanoi, on April 4.

According to the report, Vietnam’s economy has made an impressive recovery in 2022, thanks to the support of exports, strong foreign direct investment and the recovery of domestic consumption.

However, 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 said ADB Country Director for Vietnam Andrew Jeffries.

Therefore, Vietnam’s economic growth is expected to moderate at 6.5% this year and further expand at 6.8% in 2024.

The ADO highlighted that the global economic slowdown deepened in the fourth quarter of 2022 and will likely continue in 2023. Falling global demand is expected to weigh on industrial growth, it said, adding that agriculture output is expected to grow by 3.2% this year, on revived domestic demand and the reopening of China, which accounts for 45% of Vietnam’s export of fruits and vegetables.

In addition, tourist arrivals from China as of March 15, are expected to benefit tourism and services in Vietnam, with the sector forecast to grow by 8.0% this year.

Principal Country Economist for Vietnam Nguyen Minh Cuong said, that the fiscal deficit in 2023 could exceed the target, which is 4.4% of GDP. He said that Vietnam should continue reform, to make its finances more sustainable, significantly reducing dependence on unsustainable revenue sources, such as land and oil.

The ADB forecast that on the demand side, domestic consumption will continue to rebound in 2023. Revived tourism, new public investment and stimulus programmes initiated in January 2022, and a salary increase effective in July 2023, are expected to keep domestic consumption on the rise, though higher inflation may hamper its recovery.

According to the ADO, the Vietnamese government is committed to disbursing 30 billion USD over the year, of which 90% has been allocated to disbursing ministries and provinces as of January 2023. Foreign investment, however, will still be hampered by the global economic slowdown. Newly registered and disbursed FDI fell by 38% and then 4.9% year on year, in the first two months of 2023.