WB: Strategic investment pipeline needed for sustainable economic development

The reports reveals that the industrial production index grew by 2.89 % on-month in October, due to the continued recovery of manufacturing exports.

However, prospects remain fragile as Vietnam’s PMI remained in contractionary territory in October (49.6), as it was in September (49.7). The monthly growth of retail sales remained flat of -0.01 % in October, compared with 0.55 % growth in September. 

Exports and imports of goods continued to recover, increasing by 1.6 % and 1.05 % respectively, as demand from trade partners continued to gradually recover. However, both exports and imports of the first 10 months remained in contractionary territory, decreasing by 6.9 % (on-year) and 12.4 % (on-year) respectively.

The Consumer Price Index (CPI) inflation registered 3.6 % on-year in October, driven by transport costs, while core inflation fell from 3.8 % on-year in September to 3.4 % on-year in October, below the 2023 policy rate of 4.5 % set by the authorities.

Credit growth remained sluggish, registering -0.1 % (m/m) and 9.3 % (on-year) in October 2023, well below the pre-COVID period and reflecting persistent weak private investment.

The economic slowdown continued to weigh on the government budget. Despite a surge in revenue collection in October, revenue collection during the first 10 months of 2023 was 4.5 % lower than the same period of the last year.

At the same time, public expenditure accelerated by 11.4 % during the same period (on-year) reflecting the government’s effort to support the slowing economy.

Public investment disbursement increased by 35 % (on-year) for the 10-month period, helping the government achieve 55 % of the annual planned budget (compared with 46.5 % during the same period of 2022).

This execution rate, however, is still low given that there are only two remaining months for disbursing 2023 budget.

According to WB experts, while a gradual recovery of exports is ongoing, domestic consumption remains subdued and slow credit growth continues to reflect weak private domestic investment and investor confidence.

Think tanks point out that the authorities continue providing support to the economy through a 35 % (on-year) increase in public investment during the first 10 months. However, implementation challenges continue to affect the roll out of the investment budget.

They assess that given the slow pace of economic recovery, the authorities may wish to consider extending the economic support program to 2024 to allow investment projects to be fully implemented.

Preparing higher quality projects – including through better feasibility studies and the reform of public investment procedures would help to speed up implementation, they noted.

A strategic and well-prepared investment pipeline with a focus on green, resilient and regional infrastructure will help bolster sustainable economic development.