OECD forecasts Vietnam's GDP growth at 6.5 per cent

On April 26, the Ministry of Planning and Investment (MPI) in cooperation with the OECD, the Asian Development Bank (ADB), line ministries, and ministerial-level agencies organised the launch ceremony for the OECD Economic Surveys: Vietnam 2023 report. This is the first economic survey for Vietnam prepared by the OECD and the ADB.

Koen Vincent from the OECD said that Vietnam has made significant economic progress over the past decades and has maintained a high growth rate. Extensive and ongoing reforms since the late 1980s have been key to this economic success. Vietnam's economy has also demonstrated resilience to shocks, including the pandemic. During that time, the country's economic growth outperformed most of its Southeast Asian counterparts.

The OECD forecasts that Vietnam's economy will grow by 6.5 per cent in 2023 and 6.6 per cent in 2024.

"However, Vietnam is vulnerable to geopolitical uncertainties and the risk of supply chain disruptions. Besides this, in the short term, external conditions threaten the recovery of the economy. Supply chain disruptions could continue risking global trade, and rising inflation around the world could add further downward pressure on Vietnam's exchange rate," said Vincent.

With significant challenges ahead, the OECD expert said that Vietnam needs to up its efforts to promote structural reforms to further strengthen market forces.

The report conveys three key messages. First, macroeconomic policies need to help enhance economic resilience. In the short term, the priority should be to minimise the impact of high energy prices through targeted support for vulnerable households, rather than deploying further expansionary fiscal measures.

In the medium term, it is crucial to strengthen the macroeconomic policy framework by improving fiscal sustainability through expanding the tax base. Social protection also needs to be strengthened and economic informality reduced.

Secondly, to maintain the high economic growth seen during the recovery, Vietnam needs to further improve the business climate and facilitate the digital transformation. Reinvigorating business dynamism requires further streamlining regulations, increasing the transparency of regulatory processes and levelling the playing field among all market participants, including between state-owned enterprises and private entities.

The third task should be to achieve the objective of reaching net-zero emissions by 2050, sustaining high levels of investment in renewable energy, and pursuing greater energy efficiency. This can be achieved through a comprehensive policy approach that priorities effective public and private investment, conducive regulatory settings, and market prices that better reflect carbon content.

Deputy Minister of Planning and Investment Tran Quoc Phuong highly appreciated the completion of the report, which is an important document including scientific, objective, and valid assessments. He believes that the report will be an important reference for many Vietnamese ministries, branches, and research agencies during the process of advising on policy development.

At the launch ceremony, experts and participants discussed the content of the report, focusing on stabilising macroeconomic conditions, controlling inflation, creating foundations for socioeconomic recovery and development, streamlining product market regulations, promoting digital transformation and green recovery, and enhancing the independence and autonomy of the nation's economy.

The strong rebound seen in 2022 is unlikely to be sustainable, with overall growth momentum likely to moderate further in 2023. As a result, UOB has lowered Vietnam’s full-year GDP growth forecast for 2023 to 6 per cent from an earlier call of 6.6 per cent.

Despite a gradual rebound in retail and consumption, lingering difficulties since Q4 last year are expected to continue making dents in economic growth of 2023, with industrial production declining in the first months of the year.

After a strong performance last year, the Vietnamese economy can expect moderate growth of 6.5 per cent this year, followed by a slight improvement to 6.8 per cent in 2024, according to a recent economic publication from the Asian Development Bank (ADB).