In this webinar, Dr Luc Can and Dr Tuan Ho discussed Vietnam’s economic performance in 2023 and its outlook for 2024. They also shared insights on opportunities and potential challenges that investors should be aware of.
VIETNAM STUDIES PROGRAMME WEBINAR
Tuesday, 16 January 2024 — ISEAS – Yusof Ishak Institute organised a webinar titled “Vietnam’s 2024 Economic Outlook”, presented by Dr Luc Can, Chief Economist at the Bank for Investment and Development of Vietnam (BIDV) and Dr Tuan Ho, Senior Lecturer at the School of Accounting and Finance of the University of Bristol.
Dr Luc Can began by presenting an overview of the global economic landscape, highlighting its downward trajectory since 2022. The global economy saw a modest growth of only 2.6 per cent in 2023, with a projected growth of 2.4 per cent in 2024. Global inflation, which peaked at 8.6 per cent in 2022, decreased to around 5 per cent by the end of 2023 and is anticipated to decline further to 3.9 per cent by the end of 2024. Major challenges to the global economy include conflicts in Ukraine and the Middle East, persistent high inflation and interest rates, ongoing financial and monetary risks, a slower-than-expected recovery in major economies, and negative impacts of climate change.
Due to external challenges, especially weaker export demands, Vietnam was unable to meet the 2023 growth target of 6.5 per cent and only registered a 5.1 per cent growth.
On the upside, Vietnam’s economy demonstrated a remarkable recovery from the COVID-19 pandemic. The government implemented various policies and measures to eliminate market bottlenecks, which have resulted in quarter-by-quarter economic growth. Retail sales of goods and services grew by approximately 9.6 per cent, while industrial production rebounded from May 2023 onwards. Despite a 4.4 per cent decline in exports for the whole year, a gradual recovery was observed toward the end of the year.
Vietnam’s main trading partners in 2023 were the United States, China, South Korea, Japan, the European Union, and ASEAN. The US was the number one export market, whereas China was the largest import market for Vietnam. Foreign direct investment (FDI) reached US$23 billion in disbursement, and registered FDI reached US$36 billion. Public investment also played a key role in driving Vietnam’s economy, growing by about 21 per cent in 2023.
Dr Luc noted a decrease in inflation from the second quarter of 2023, along with a stable exchange rate. The stock market has recovered, with the VN-Index growing by approximately 12.2 per cent. Vietnam’s digital economy experienced a substantial 20 per cent growth in 2023, the highest among ASEAN countries. Notably, Vietnam recorded the biggest improvement in the Economist Intelligent Unit’s business environment rankings and earned an upgraded sovereign credit rating of ‘BB+’ from Fitch Ratings.
Forecasts project Vietnam’s 2024 GDP to grow between 5.5 and 6.5 per cent, with BIDV Research leaning towards 6.5 per cent. This figure is higher than the regional average of 4.5 per cent.
However, Vietnam’s economy will have to cope with several internal constraints. First, trade and industrial production have been facing weaker demand. Second, state budget revenues have decreased, reflecting downside risks for enterprises in certain sectors. Third, businesses still face many obstacles, including legal constraints for the real estate sector, high financial and input costs, and slow restructuring of some weak state-owned enterprises and banks. Fourth, there has been a surge in non-performing loans. Finally, there are pressing needs for stronger institutional reform, as well as improved infrastructure and skilled labour availability to enhance productivity.
On the bright side, there are still a lot of investment opportunities, given Vietnam’s political stability, high economic growth, rising middle class, large market size, and reasonable labour costs. There is also potential growth in several sectors, particularly green economy and climate financing. Despite significant headwinds, the government’s commitment to economic reforms, improved banking liquidity, and signs of recovery in the property sector paint an overall positive outlook.
Dr Tuan discussed the promising signs and challenges for Vietnam’s economy in 2024. He began with a quick review of Vietnam’s economy in 2023, underscoring that the 5 per cent GDP growth was primarily supported by government spending. Noteworthy was the robust 9.3 per cent growth in retail sales of goods and services, juxtaposed with a 4.4 per cent decline in export growth. While non-state and foreign investment showed slow growth, public investment was pivotal in providing capital for the economy.
Dr. Tuan maintained an optimistic view of Vietnam’s economic prospects in 2024 for several reasons. First, the growth prospect of Vietnam in 2024 is still better than other Southeast Asian countries. Second, balance of payments has been fairly healthy thanks to solid FDI and remittance, contributing to the stability of the Vietnamese dong. Third, inflation has remained under control, thanks to vigilant government monitoring. Finally, factory layoffs have decreased in the final quarter of 2023, though concerns linger over youth unemployment in urban areas.
However, Dr Tuan also warned of some red flags. First, the real estate sector continues to face challenging business conditions and worsening credit quality. Second, banks have witnessed a rise in non-performing loans. Third, the global economic slowdown could negatively affect Vietnam’s export growth and its ability to attract FDI. Fourth, investors have expressed concern over Vietnam’s shortage of high-skilled workers, as 72 per cent of Vietnamese workers lack basic skill training. Moreover, Vietnamese firms had the highest ratio of short-term liabilities in Southeast Asia, rendering them less resilient to external shocks.
Dr Tuan concluded by highlighting three aspects of Vietnam’s economic performance that warrant close attention in 2024: the trajectory of export growth and FDI, developments in the real estate sector, and the disbursement and quality of public investment.
During the Q&A session, the two speakers addressed questions related to the amended Law on Credit Institutions, primary concerns of foreign investors, the impacts of the anti-corruption campaign on Vietnam’s economic performance, differences between Vietnam’s and China’s economic performance and prospects, projections for Vietnam’s inflation in 2024, and the outlook for the real estate sector in Vietnam, among other issues.
322 participants attended the webinar.