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Forecast when Vietnam's economy bottoms out

Vietnam is performing better than most countries in the world. The representative of the International Monetary Fund (IMF) has made a forecast for Vietnam's economy, especially when growth returns to a stable trajectory and begins to recover.

According to Mr. Paulo Medas, Head of the Delegation in Charge of Vietnam at the International Monetary Fund (IMF), the IMF forecasts that Vietnam's economy will recover in the second half of this year due to the beginning of export recovery and the implementation of measures and supportive policies to improve Vietnam's economy.

The Vietnamese economy will rebound in the second part of the year

The International Monetary Fund (IMF) and DBS Bank, Singapore's biggest global banking and financial services firm, have issued statements about the Vietnamese economy.

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

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

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

Marco Förster, Head of ASEAN Consulting at Dezan Shira & Associates, said economies are always cyclical, and slow growth is inevitable.

With current difficulties, Vietnam is expected to experience rapid economic growth in the medium term thanks to its emerging position as a leading manufacturing hub in Southeast Asia, a highly educated population and investment capital increases.

S&P Global Ratings also assesses that a young, increasingly highly educated and highly competitive workforce is the main attraction for foreign investors and forecasts that Vietnam's economy will recover over the next 24 months as global demand picks up and Vietnam gradually addresses domestic challenges.

Forecast about Vietnam

In the context that the world situation continues to be complicated, with 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 consider this to be an appropriate growth rate in the general context of the global economy and, at the same time, are optimistic about the recovery of Vietnam's economy in the coming time.

Mr. Paulo Medas said getting rid of Covid-19 is difficult for any country. The challenging global environment has made that process more complicated.

Internationally, strong and sustained inflation in advanced economies in 2022 prompted central banks to raise interest rates sharply. At the same time, the global economy is decelerating, and that affects Asian exporters.

Domestically, Vietnam also has some internal problems, such as the real estate market and instability in the financial market, especially the corporate bond market, which weighs heavily on the economy.

Forecasting when Vietnam's economy will bottom out, IMF experts believe that Vietnam's economy will recover in the second half of this year.

The IMF forecasts that Vietnam's economy will be relatively stable, with a growth rate of about 4.7% this year.

The IMF representative also emphasized that inflation is expected to continue to be controlled below 4.5% this year and 2024.


Commenting on the Vietnamese economy's challenges, the Head of the Vietnam Mission at the IMF said that the Vietnamese economy is facing big "headwinds" from domestic shocks and outside.

Especially with the relatively weak outlook of the world economy, the risk is that Vietnam's economic growth in 2023 and 2024 may be lower than expected. A speedier rise in exports, on the other hand, might lead to a stronger economic recovery.

Furthermore, issues in the real estate market will continue to stymie growth in the short run. However, Mr. Medas believes that the sector will revive over time. Given the high need for cheap housing, this might be a significant development driver. The sooner the sector's challenges are rectified, the better the sector's growth chances will be.

Another important component for growth is ensuring that domestic capital markets (particularly corporate bond markets) and banks are strong enough to supply additional credit and capital to the private sector in the medium term, allowing for higher growth.

Also read: Vietnam Corporate bonds "break the ice": Real estate group accounted for more than 98% » Vietnam News - Latest Updates and World Insights |

Achieving ambitious development goals will require Vietnam to accelerate reforms to improve the business environment, develop critical infrastructure, and invest in education.

Vietnam's new energy and climate plans have also been seen as important steps forward, but concrete actions must be taken, including strengthening the legal and regulatory framework for private investment in renewable energy.

Vietnam needs more action

Overall, Vietnam must improve its economy's resilience to shocks and create an institutional framework that unlocks its full growth potential.

The IMF expert pointed out that the Vietnamese government has been cautious, and public debt has decreased recently. Therefore, there is still fiscal space to support the economy if growth continues to be low. In addition, some structural reforms could also lead to a stronger and more sustainable recovery.

Specifically, Vietnam needs to take more actions to restructure the real estate sector and promote the healthy development of the corporate bond market.

Also read: Real estate sector still in distress » Vietnam News - Latest Updates and World Insights |

Given the current challenging domestic and global economic environment, it is important to accelerate reforms to protect financial stability, including strengthening crisis prevention and management capabilities and stepping up efforts to improve banking regulation and supervision.

According to an IMF expert, revising the Law on Credit Institutions is being implemented as an opportunity to develop legal frameworks for dealing with weak banks and emergency liquidity.

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