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IMF: Vietnam's economic growth will recover in the second half of the year





Commenting on Vietnam's economy, the IMF and DBS said Vietnam is performing better than most countries in the world, considered an attractive destination for foreign investors in the manufacturing sector.

 Ho Chi Minh City Center next to the Saigon River.

Although the growth rate has slowed down in the context of global economic difficulties, Vietnam is performing better than most countries in the world, being considered an attractive destination for direct investment. foreign investment (FDI) in the manufacturing sector.

This is the assessment of the International Monetary Fund (IMF) and DBS Bank - Singapore's leading multinational banking and financial services group on Vietnam's economic situation in the first half of this year.

In the context of the world's increasingly complex fluctuations and internal difficulties, Vietnam's Gross Domestic Product (GDP) in the first 6 months of 2023 only reached 3.72%, not as expected. .

However, most experts evaluate this as an appropriate growth rate in the general context of the global economy, and are optimistic about the recovery ability of Vietnam's economy in the near future.

After a periodic consultation on Vietnam's economic situation in June, head of the IMF's Article 4 working group, Mr. Paulo Medas, said that like other countries in the world, Vietnam is facing challenges. Difficult and complicated external conditions such as global growth going down, while interest rates increase.

Reduced worldwide demand caused Vietnam's exports to decrease by 12% in the first 6 months of the year and greatly affected economic growth.

Vietnam also faces internal problems such as the slowdown of the real estate market, corporate bond market...

However, the gradual easing of monetary policy such as reducing interest rates, cutting taxes and expanding public spending investment has helped mitigate the impact of headwinds.

With the above comments, the IMF believes that Vietnam's economic growth will recover in the second half of 2023, reaching about 4.7% for the whole year thanks to recovering exports and loosening domestic policies. Inflation is expected to be controlled below the State Bank's target of 4.5%.

In the medium term, Vietnam could return to achieving high growth rates as structural reforms are implemented.

According to expert Paulo Medas, in the short term, risks to Vietnam's growth are still large. Therefore, policies now should focus on ensuring financial and macroeconomic stability, while accelerating reforms.

Fiscal policy can play a larger role to support economic growth and support the poorest and most vulnerable.

The IMF also recommends that Vietnam take drastic actions to restructure the real estate market and promote the healthy development of the corporate bond market; improve the business environment, upgrade key infrastructure and invest in education.

With the total newly registered FDI capital in the first half of 2023 increasing by about 30% over the same period last year, DBS Bank assesses that despite facing many challenges, Vietnam is still an attractive destination for FDI thanks to the shifting trend. manufacturing, multiple free trade agreements (FTAs), bright medium-term growth prospects at 6-7% and a growing electronics ecosystem.

Importantly, new FDI inflows into the manufacturing sector increased sharply in 2023, reflecting that foreign investors' confidence in Vietnam's long-term potential remains undiminished.

On this basis, DBS believes that in the second half of 2023, Vietnam's exports may increase slightly as the global electronics industry cycle recovers.

Vietnam's domestic services and tourism industry will likely continue to grow well and supplement the economy.

Head of the ASEAN Consulting Department at consulting firm Dezan Shira & Associates, Mr. Marco Förster also noted that economies are always cyclical, and periods of slow growth are inevitable.

Faced with current difficulties, Vietnam is predicted to achieve rapid economic growth in the medium term thanks to its emerging position as a leading manufacturing center in Southeast Asia, a highly educated population and investment capital increases.

Sharing this view, credit rating agency S&P Global Ratings believes that a young, increasingly highly educated and highly competitive workforce is the main attraction for foreign investors. At the same time, it is forecasted that Vietnam's economy will recover in the next 24 months as global demand increases and Vietnam gradually addresses domestic challenges.

In “OECD Economic Report: Vietnam 2023,” the Organization for Economic Cooperation and Development (OECD) forecasts Vietnam's economic growth to be solid, at 6.5% in 2023 and 6.6% in 2023. % in 2024.

However, according to Dr. Koen Vincent of the Economic Department of the OECD, with the openness of the economy, Vietnam is easily affected by geopolitical instability and the risk of supply chain disruption.

Besides, in the short term, external conditions threaten the recovery of the economy. Supply chain disruptions could continue to weigh on global trade, and rising inflation around the world could put further downward pressure on Vietnam's exchange rate.

Therefore, macroeconomic policy first needs to help strengthen the economy's resilience, in the short term, with priority given to minimizing the impact of high energy prices through targeted support for vulnerable households.

Over the medium term, the report emphasizes the need to strengthen macroeconomic policy frameworks by improving fiscal sustainability through broadening the tax base, strengthening social protection systems and reducing the size of of the informal economic sector.

In addition, Vietnam needs to further improve the business environment and facilitate the digital transformation process to maintain high economic growth after recovery.

In the field of tourism, Google Destination Insights report shows that Vietnam was the 7th most searched destination during the period from March to June and is the only country in Southeast Asia in the top 20.

Mr. Gary Bowerman, a tourism analyst in Kuala Lumpur (Malaysia), said that changes in visa regulations will help Vietnam's tourism industry grow in the next 6 months. The number of tourists coming to Vietnam will increase sharply, especially when the Chinese market returns. However, the number of international visitors to Vietnam has not yet reached pre-Covid-19 levels.

OECD identifies Vietnam's biggest challenge as improving infrastructure quality, better linkages between tourism service providers, expanding local participation and better controlling mass tourism. in natural areas.

According to OECD, Vietnam also needs to better exploit domestic tourism, quickly diversify tourist sources from outside, focusing on the markets of ASEAN countries and India, which Vietnam currently exploits limitedly compared to other countries. neighboring countries such as Laos, Cambodia or Malaysia.

With a competitive workforce and high investment capital, experts believe that Vietnam still has room to implement measures to promote growth and the prospect of economic recovery in the last months of the year is positive. .

According to