Vietnam’s economic growth is expected to slow down to 6.3 percent in 2023, following a strong performance of 8 percent in the previous year, according to the World Bank’s latest Taking Stock report. The moderation in growth is attributed to a decline in services growth and the impact of higher prices and interest rates on households and investors. However, the report predicts a rebound to 6.5 percent growth in 2024 as Vietnam’s main export markets, including the United States, China, and the eurozone, gain strength.
The outlook for Vietnam is influenced by the uncertainties in the global economy. Potential downside risks include weaker growth in major export markets, tightening financial conditions, higher domestic inflation, vulnerabilities in the corporate, banking, and household sectors, as well as financial sector weaknesses. In response, the report recommends a data-driven approach and increased vigilance in policymaking to manage the trade-off between growth and inflation, strengthen the supervisory framework for the financial sector, and address potential vulnerabilities.
The World Bank highlights Vietnam’s fiscal capacity to implement measures to stimulate growth, distinguishing it from many other countries. The effective implementation of priority public investments is emphasized as crucial to supporting short-term and long-term growth. The report emphasizes the need for synchronization between fiscal and monetary policies to ensure effective support to the economy and maintain macroeconomic stability.
The report’s special section focuses on Vietnam’s services sector and identifies four key reforms that could unlock its potential for employment and value addition. The analysis suggests that leveraging the diversified services sector is essential for Vietnam to achieve its objective of becoming a high-income economy by 2045. Reforms are needed to enhance services sector productivity, promote cross-sectoral contributions to manufacturing and agriculture productivity, reduce restrictions on services trade and foreign investment, encourage innovation and technology adoption, strengthen skills and capabilities of workers and managers, and prioritize services that can drive growth in other sectors.
The Taking Stock report serves as the World Bank’s bi-annual economic assessment of Vietnam. The report highlights the need for proactive policies and reforms to address challenges and maximize the potential of Vietnam’s economy, ensuring sustained growth and progress.
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