HANOI: Despite a slight decline in quarterly economic growth from 5.92% in the fourth quarter of 2022 to 3.32%, Vietnam continues to maintain a positive growth rate.
According to the International Monetary Fund (IMF), the positive growth rate sets the country apart from the gloomy situation experienced by some economies in the ASEAN bloc and around the world, which have witnessed consecutive negative growth in recent months.
In comparison, Thailand and Singapore reported GDP growth rates of 2.7% and 0.4% respectively. Outside the ASEAN bloc, Japan and South Korea recorded growth rates of only 0.4% and 0.3% respectively.
The scale of GDP in 2022 and 2023 for ASEAN countries according to the IMF forecast.
Vietnam has effectively controlled its Consumer Price Index (CPI). As of May, the CPI increased by only 0.01%, following a downward trend in the previous months.
While the decision to raise electricity prices contributed to a 0.06 percentage point increase in CPI, this is the first time Vietnam has increased electricity prices in four years, which was only by 3%.
Moreover, Vietnam's electricity prices remain among the lowest in the ASEAN bloc following consistent government regulations aimed at ensuring affordable access to electricity for the population.
Foreign direct investment (FDI) has also shown positive signs in Vietnam.
As of May 20, the total foreign investment capital reached $10.86bil, with registered capital amounting to $5.26bil.
This marks a 65.2% increase in registered projects and an 11.1% increase in registered capital compared to the previous year.
Samsung, a major FDI contributor, has invested $20bil in Vietnam, primarily in the electronics and semiconductor manufacturing sectors.
In recent years, The Vietnamese government has implemented numerous transportation and infrastructure projects, envisioned as driving forces for economic development and investment attraction.
These developments affirm Vietnam's potential as an attractive market for foreign investment in the near future. A notable deal that attracted foreign investors' attention was the share acquisition project by Japanese investors in VPBank, with a total transaction value of up to $1.5bil.
The IMF maintains a positive outlook on Vietnam's economy.
According to the IMF’s latest report, Vietnam's GDP based on purchasing power parity (PPP) is estimated at $1.451tril, ranking fourth in the ASEAN. The IMF projects Vietnam's GDP (PPP) to reach $1.872tril, surpassing Thailand and becoming the second-largest economy in Southeast Asia.
In its March 2023 Review, the World Bank evaluated Vietnam's economy and recognised its strong recovery in 2022, with a growth rate of 8.0%, surpassing the average of 7.1% during the 2016-2019 period.
The World Bank forecasts Vietnam's GDP growth rate to reach 6.3% in 2023.
However, attracting FDI is not solely dependent on domestic efforts. Since his inauguration in 2021, Prime Minister Pham Minh Chinh has been seeking opportunities to attract foreign investment.
His visits to the UK for the UN Climate Change Conference in Glasgow, Europe at the end of 2022, and Japan for the G7 Summit have garnered significant attention from the media and corporations.
The Asia Fund Managers points out that these efforts are to ensure that Vietnam would be able to reap the benefits from its position as the fastest-growing economy in Asia.
The immediate response to these efforts is evident as in the case of the Adani Group that expressed its intention to invest an additional $3bil in Vietnam just two days after the G7 Summit concluded, according to Energy Tracker Asia.
Major diplomatic activities such as the visit of South Korean President Yoon Suk-yeo and a delegation of 205 business members to Vietnam, along with the official visit of Prime Minister Pham Minh Chinh to China, are scheduled to take place at the end of June 2023.
These activities are expected to further boost Vietnam's economy and demonstrate that the target of 6.5% growth is not too far-fetched.
Prime Minister Pham Minh Chinh at the summits of G7 (2023).
The global financial crisis has brought about frequent and sudden changes in the global economy with immediate impacts.
In such circumstances, China Economics Summer Institute believes that a highly centralised government capable of implementing proactive policies appears to be more effective than decentralized power structures.
It notes that Vietnam's government serves as an example of such effectiveness, and therefore, the recent achievements of the country have gained positive recognition from international organisations.
“During this tumultuous period in history, Vietnam has demonstrated resilience and growth.”
Michael Johnston
PhD Student in Macroeconomics.
