Public investment key to Vietnam’s growth

HANOI: The Asian Development Bank’s (ADB) September report forecasts that Vietnam’s economic recovery will pick up in the near term on the back of strong domestic consumption, moderate inflation, acceleration of public investment, and improved trade activities.

In the first two quarters of 2023, economic growth dropped to 3.7%, which was not expected earlier in the year.

However, ADB country director for Vietnam Shantanu Chakraborty said he remains very confident that Vietnam will be able to achieve overall annual growth of 5.8% for 2023.

This is premised upon early signs of upticks in the services sector and construction. Vietnam is also seeing growth in the agricultural sector, given the robust stability that has been shown in agricultural prices.

“So, there are some drivers of the economy that we believe will contribute towards Vietnam achieving its 5.8% economic growth, despite sluggishness in the first couple of quarters,” Chakraborty said

“I believe maintaining the momentum of public investment will be crucial because that is what is going to rejuvenate economic activity, generate employment, and put more money in the hands of people to enhance domestic consumption.

“The monetary and fiscal policies adopted by the government up until now have really facilitated keeping inflation under control. Our projection on inflation in Vietnam for now is 3.8% for 2023, and 4% for 2024.

“There are, of course, certain challenges in terms of the rising global interest rates, the disruptions caused by geopolitical events, and the monetary tightening in some countries.

“But overall, given the stability of agricultural production in the country so far, and the fact that oil and gas prices are expected to remain stable for the rest of the year, I strongly believe that, based on the low inflation rates that were experienced by Vietnam in the first half of the year, overall inflation of 3.8% is very much achievable,” he said.

Meanwhile, The ADB believes that public investment remains a key factor for the country’s economic growth.

By some estimates, there is about US$30bil of public investment that has been planned, so a concerted effort needs to be made to expedite spending the money so it will boost demand in the market, lead to employment generation, and foster overall economic activities.

Consumption is another factor the bank said will be important for Vietnam. Given that inflation is now low and there is liquidity in the hands of people, domestic consumption needs to remain strong to offset the adverse impact of export-related activities.

While renewed growth is possible, many of Vietnam’s key trading partners are tightening monetary policy, causing some headwinds.

At the same time, Vietnam’s manufacturers are benefiting from the low costs of borrowing domestically, given the high level of liquidity in the domestic market. — Viet Nam News/ANN