Vietnam’s economic growth slows due to global headwinds and internal constraints
VOV.VN - A challenging external environment and weaker domestic demand is leading to a slowdown in economic growth in Vietnam, but the economy will pick up pace in the second half of 2023 and the following years, the World Bank said in an economic update released on August 10.
“Making Public Investment Work for Growth” shows that Vietnam’s economic growth nosedived from 8% in 2022 to just 3.7% in the first half of 2023. It forecasts a moderate growth of 4.7% for the whole of 2023, before gradually accelerating to 5.5% in 2024 and 6.0% in 2025.
The financial institution says a proactive fiscal policy supporting short-term demand, removing barriers to the implementation of public investment, and addressing infrastructure constraints can help the economy achieve these targets and promote long-term growth.
“Vietnam’s economy is being tested by internal and external factors. To boost economic growth, the government can support aggregate demand through effective public investments, thereby creating jobs, and stimulating economic activity,” said Carolyn Turk, World Bank Country Director for Vietnam.
“Beyond short-term support measures, the government should not lose sight of structural institutional reforms – including in the energy and banking sectors – as they are imperative for long-term growth,” added Turk.
The report suggests policy options to get the economy back on track. Effectively implementing the 2023 investment budget can stimulate aggregate demand and economic growth.
On exports, it suggests diversifying product offerings and export destinations to build medium-term resilience against external shocks. At the same time, fiscal policy can play a stronger role in incentivizing green practices and consumption, ultimately contributing to environmental sustainability.
The report’s special chapter studies Vietnam’s public investment management and how it can contribute to the goal of climbing the income ladder. To harness the power of public investment, the report recommends that Vietnam sustain its level of investment, improve the quality of the proposed project, and address deficiencies in public investment management and inter-governmental fiscal institutions.
