Sustaining Economic Recovery and Prospects for Growth in 2023

Viet Nam Economic Pulse forum

November 22, 2022
UNDP Viet Nam

Ha Noi 22 November 2022 – Flexible policies and a successful COVID-19 vaccination campaign have resulted in impressive progress in Viet Nam’s economic prospects this year. But the road ahead is paved with challenges.  Risks to growth in the future, largely related to external factors, have multiplied.

In 2022, Viet Nam outperformed other countries in the region following a rebound in consumer spending, several quarters of robust export growth and the gradual return of international tourism. GDP growth in the third quarter of 2022 exceeded all forecasts, estimated to increase by 13.67% over the same period last year, bringing GDP growth in the first 9 months of 2022 to 8.83%. Inflation was still controlled below the set target (4%/year). However, a global growth slowdown and heightened risks of financial instability could weigh on growth in 2023 and 2024.

This was the focus of the 2nd Viet Nam Economic Pulse forum (VEP) which took place in Ha Noi today on the topic: “Extending Economic Recovery – Growth Drivers” with the participation of Government officials, development partners, business leaders and scholars.

The forum was jointly organized by the National Center for Socio-Economic Information and Forecasting, under the Ministry of Planning and Investment (NCIF-MPI) and the UN Development Program (UNDP), to analyze and assess the economic recovery process after the COVID-19 pandemic and policies to sustain growth and development in the coming year.

Mr. Dang Xuan Quang, Deputy Director of the National Center for Socio-Economic Information and Forecasting under the Ministry of Planning and Investment, said: “Through this forum, the Ministry of Planning and Investment and UNDP have got more useful information and proposed policy solutions, which serve as the basis for supplementing and refining the system of policy solutions for economic recovery and development of Viet Nam in the coming time".

According to UNDP Resident Representative Ramla Khalidi, Viet Nam has bright economic prospects but risks are multiplying. “Evidence of a strong recovery is welcome news after two years of economic disruption caused by the COVID-19 pandemic. Vietnamese households will enter the Year of the Cat in 2023 in better financial shape than a year ago,” she said.

The risks to sustaining the recovery are mostly external. War in the Ukraine, economic slowdown in China, rising international interest rates, and a strengthening dollar and the growing risk of recession in Europe could affect demand for Viet Nam’s exports and increase the risks of macroeconomic instability. Policy makers will need to remain vigilant, adjusting fiscal and monetary policy in a timely manner as global conditions evolve.

There are also domestic risks, especially in the banking and bond markets, which are sensitive to rapidly changing conditions in the property sector. The negative impact of climate change will increasingly weigh on agricultural production and on the health and well-being of communities affected by sea level rise, flooding, drought, and high-intensive storms.

At the Forum, Mr. Francois Painchaud​, IMF Resident Representative for ​Viet Nam and Lao P.D.R., presented the Report: “Global Economic Outlook: ​ Sailing into the headwinds​”. He said that with strong growth through September, GDP growth forecast for Viet Nam in 2022 would be from 6 to 7.5%. However, due to slowing external demand and tighter financial conditions, the growth forecast for 2023 is 5.8%. Inflation is expected to edge up, before gradually returning below 4%.

According to Mr. Painchaud, policies need to be carefully calibrated, coordinated, and communicated; the State Bank of Viet Nam should focus squarely on inflation​; Safeguard financial stability​; Flexible fiscal policy; more targeted if inflation builds up; and Structural reform.

In his presentation on “Viet Nam Economic Outlook Update”, Dr. Tran Toan Thang, Director of Industry and Enterprise Economic Forecasting Department, National Centre for Socio-economic Information and Forecast under the Ministry of Planning and Investment, said that the economic recovery in 2023 will continue to benefit from the implementation of the 2022-2023 Economic Recovery Program. It is forecasted that Viet Nam will still try to maintain the target of stabilizing interest rates and exchange rates, keeping interest rates low to support growth. Regarding fiscal policy, the investment component of the Support Program - amounting to about 1.6% of GDP - is expected to be mainly implemented from 2023 onwards. However, with a fairly high growth in 2022, Viet Nam's economic growth in 2023 will slow down – gradually returning to its pre-COVID-19 state, as the domestic demand rebound may not be as strong as that of 2022. Rising raw material prices begin to translate more clearly into production costs. Import and export may increase more slowly than in 2022 due to the prolonged difficult situation of Viet Nam's main export markets. Foreign investment attraction is forecast to remain low due to increased global economic risks.

Which scenario Viet Nam's economy follows in 2023 depends on many factors: developments in the Russia-Ukraine conflict, the recovery of the global economy, especially Viet Nam's major economic partners. At the same time, efforts are being made to implement solutions to promote economic growth and the Socio-economic Recovery and Development Program. With the above influencing factors, Viet Nam's economy in 2023 can happen under two scenarios. Scenario 1, economic growth may be only 6-6.2% if risk factors outweigh the established recovery trend in 2022. Scenario 2, more optimistic, economic growth may reach 6.5-6.7% if the recovery process is more favorable and the impacts from the international context are not too big.

In his presentation entitled: “Exports still matter”, Dr. Jonathan Pincus, UNDP Senior International Economist, said “Growth of exports is still the most important factor influencing Viet Nam’s economic growth over the long period. Growing exports means producing competitively, but also producing ‘dynamic’ goods and services that are growing as a share of total global trade. Dynamic goods are often sophisticated manufactured goods, but also higher value-added agricultural products that are in high demand in advanced countries. The policy implication is that government can use public investment, education, and information to help exporting firms producing dynamic goods and services for exports”.

Mr. Nguyen Quang Thuan, CEO, FiinGroup, presented on Viet Nam Corporate Bond Market: The Need for “A Visible and Strong Hand”. He noted the key risks to the economy, including i) Social Unrest expanding – affecting public confidence in financial system, not only new bonds issuance, in banking sector and equity market. Refinancing cannot be made under public offerings even good credit performance issuers; (ii) Bond Defaults and Cross-Defaults - Cross-defaults to banks as investors: banking asset quality (although exposure is still very insignificant: < 3% Interest Earnings Assets). Impacts to banks as bond issuers and interbank market; iii) Corporate Debt Liquidity Crunch - Corporate insolvency. Deterioration in banking NPL.

Mr. Nguyen Quang Thuan also shared policy recommendations for short-term/ immediate actions: introducing selected liquidity facility, including  Special review on major issuers with large exposure to individual bondholders, Real estate credit program, Stimulating the public offering bonds​, Stronger messages from the Government to restore debt market confidence​; and for medium term: accomplishing the planned activities, including T Enhancing information transparency, Launching a centralized secondary market by June 2023 as required under Decree 65, Market education, Expanding investor-base, và Green credits.

UNDP and MPI launched Viet Nam Economic Pulse a year ago to create a channel to engage government officials, academic institutions, the business community, and civil society in debates concerning economic affairs and socio-economic development policy. The last VEP focused on: “Financing Recovery and Sustainable Development” to support Viet Nam’s efforts to accelerate recovery from the COVID-19 pandemic in the short term and ensure inclusive and sustainable economic growth in the long term.


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