Want to be in the loop?
subscribe to
our notification
Business News
EFFECTIVE IMPLEMENTATION OF PRIORITY PUBLIC INVESTMENTS: KEY TO SUPPORT GROWTH
The global landscape for 2022 was volatile and uncertain, weighed down by slowing growth and falling demand, persistent inflationary pressures and more aggressive monetary tightening, as well as heightened geopolitical tensions. This continues to be a double risk to global macroeconomic performance in 2023, as well as to Vietnam as a highly open economy.
This statement was delivered by Madam Carolyn Turk, World Bank Country Director for Vietnam, at an event to release the WB's latest Taking Stock report in Hanoi.
Growth expected at 6.3% in 2023
Vietnam’s economic growth is projected to ease to 6.3% in 2023 from a robust 8.2% last year, as services growth moderates and higher prices and interest rates weigh on households and investors, according to the World Bank's report. Growth is expected to pick up to 6.5% in 2024 as the economies of Vietnam’s main export markets gain strength.
The outlook for Vietnam reflects heightened uncertainty in the global economy. Downside risks include weaker-than-expected growth in Vietnam’s major export markets, which include the United States, China and the Eurozone, tightening financial conditions, higher domestic inflation, weaknesses in the balance sheets of corporate, banking and household sectors, and financial sector vulnerabilities.
Domestic and external headwinds warrant increased vigilance and data-driven policy responses. These include managing the trade-off between growth and inflation and strengthening the supervisory framework for the financial sector. On the upside, stronger than expected recovery of global growth could lift exports and hence growth above the baseline projection is grounded.
Vietnam has the fiscal space to implement measures to boost growth
Ms. Carolyn Turk said, Vietnam's economy can achieve an even better outcome if the fiscal implementation, especially public investment, is made more effective. The role of supportive fiscal policy and effective enforcement will continue to be crucial to Vietnam's economic recovery and growth, especially amid global headwinds. Vietnam's monetary and financial markets were volatile in 2022 while authorities took swift action to restore market confidence, many systemic weaknesses in the financial and banking market were revealed - and they may likely affect Vietnam's macroeconomic stability. Addressing these weaknesses through drastic and consistent reforms will ensure not only stability but also long-term economic performance and growth.
“Vietnam has the fiscal space to implement measures to boost growth, unlike many other countries. Effective implementation of priority public investments is key to support growth, both in the short-term and in the longer-term. Also, fiscal and monetary policies must be synchronized to ensure that support to the economy and macroeconomic stability are achieved effectively,” said Ms. Carolyn Turk
For Vietnam to achieve its objective of becoming a high-income economy by 2045, the country should more effectively leverage its diversified services sector to secure more sustained productivity growth. This would entail undertaking reforms to enhance services sector productivity and its cross-sectoral contributions to the productivity growth of manufacturing and agricultural sectors. Vietnam’s services sector has grown as a share of the economy, employed a greater share of workers, and seen its labor productivity increasing in the decade since 2019. However, Vietnam's performance in this area lags behind peer countries such as Malaysia, the Philippines, and Indonesia. Exports of knowledge-rich services known as “global innovator services” constitute only 9% of total services exports, and only 6.4% of total employment in the services sector is in this sub-sector, which includes information and communications technology, finance, and professional services, which are among the most productive services areas in the economy. The small scale of firms, restrictions to services trade, low technology adoption, and scarcity of inter-sectoral linkages affect productivity, suggesting that there is room for improvement through appropriate policy actions.
To accelerate growth of this sector, Vietnam could consider reducing restrictions to services trade and foreign investment in this area and implementing reforms to enhance competition and access to finance for domestic firms; encouraging firm-level product and process innovation and technology adoption; strengthening skills and capabilities of workers and managers; focusing on services that can promote further growth of other sectors, particularly processing and manufacturing.
Source: VCCI
Related News
CUSTOMS BUDGET REVENUE EXPERIENCES 3% DECLINE IN Q1
Vietnam’s import and export value reached a total of US$145.59 billion in the first quarter (Q1) of 2024, marking a year-on-year growth of 18.2%. However, the customs budget revenue saw a 3% year-on-year decline, amounting to VND71,520 billion in the quarter, thereby achieving 19.1% of the full-year target.
RAPID LAW IMPLEMENTATION MAY PROPEL MARKET FORTUNES
“Investors and developers are looking forward to the implementation of the new law, which will remove obstacles for a range of projects that are struggling due to stalled procedures and lack of legality. For them, the earlier the better,” he said.
NATION URGED TO BUILD ON ECO-IP MODEL
Industrial parks (IPs) involved in an initiative that aims to help push them into the realm of being classed as eco-parks have seen improvements across a string of indicators, according to a review event in Ho Chi Minh City last week.
YEN LU INDUSTRIAL PARK: NEW DESTINATION FOR INVESTORS
Bac Giang is a destination chosen by many domestic and foreign investors thanks to its locational advantages and its most opening and favorable investment policies. Assisted by local authorities, Capella Land Joint Stock Company has effectively invested in industrial zones, especially Yen Lu Industrial Park - a new destination for investors, to contribute to the province’s success in investment attraction.
OPTIMIZING LEGAL AND REGULATORY FRAMEWORKS FOR EFFICIENT PUBLIC INVESTMENT DISBURSEMENT
According to the Ministry of Planning and Investment, a 1% increase in public investment raises GDP by 0.058%, and each VND1 disbursed stimulates an extra VND1.61 from the non-state sector. However, plan implementation often falls short at around 80% annually, despite government efforts.
NATION URGED TO BUILD ON ECO-IP MODEL
For the 2020-2024 project, three IPs were selected for the transformation including Deep C Industrial Zones in the northern city of Haiphong, AMATA City Bien Hoa in the southern province of Dong Nai, and Hiep Phuoc IP in Ho Chi Minh City. Over the last four years, the level of compliance with the international framework on eco-IPs for all pilot complexes has increased in terms of environment, economy, and management.