Vietnamese economy shows gradual signs of positivity amid difficulties

Bright spots for the national economy

Although major economic indicators remained low, they have shown month-on-month and quarter-on-quarter increases, thereby helping to improve the common gains recorded in the first six months of the year, said Minister Dung at a regular Cabinet meeting for June and the initial six months of 2023 held on July 4.

Verifying his argument, the Minister assessed that the macro-economy has been stabilised, inflation kept in check, and major balances ensured.

Statistics indicate that the consumer price index continued to experience a downward trend with the six-month rate increasing by just 3.29% on average. The national economy enjoyed US$12.25 billion worth of trade surplus, a figure 10 times that recorded in the corresponding period last year. 

Furthermore, the total investment capital of the whole society was estimated at over VND1.35 quadrillion, up 4.7% over the same period from last year. Registered foreign investment capital reached nearly US$8 billion in the second quarter, marking an increase of nearly 50% from the previous quarter.

More than US$10 billion worth of investment capital was disbursed during the past six months, up 0.5% over the same period from last year after decreasing by 0.8% in the first five months.

Progress was also recorded in production and business activities, with six-month services inching up by 6.33% year-on-year, making up nearly 80% of the whole economy’s growth.

It is also noteworthy that many localities in key dynamic regions recorded higher gross regional domestic product (GRDP) growth in the second quarter compared to the first quarter, and even higher than the national average. Among them, Ho Chi Minh City secured growth of 5.9%, Binh Duong of 5.7%, Dong Nai of 4.8%, and Bac Giang of 13.8%, compared to growth of 1.1%, 1.7%, 3.1%, and 8.1% for these localities in the first quarter.

Challenges ahead

In contrast to this positive outlook, Minister Dung admitted that the national economy ‘still got into difficulties’ with growth of just 3.72% in the first half of 2023, a figure lower than the 6.2% estimated in the Government’s Resolution 01. He named business production capacity, investment structure, dependence on foreign investment, and export market as ‘internal problems’ for the economy that cannot be solved overnight.

According to the Minister, businesses have faced difficulties in cash flow, market penetration, and capital cost, forcing them to scale down production.

Many businesses and investors have since been forced to trim their business and production strategies or transfer shares, assets, and investment projects in the context of an unfavourable merger and acquisition (M&A) market. Some do not want to borrow bank capital due to stagnant production and unprofitable business, said Minister Dung.

Other difficulties outlined by the Minister include business environment shortcomings; labour market weaknesses; adverse weather patterns such as storms, floods, heat waves, and droughts; epidemic risks; and power shortages, that need to be overcome to avoid affecting economic growth and the business investment environment.

It is therefore necessary to introduce drastic and proactive solutions for performance to create a spillover effect and maximise the overall effectiveness of policies and resources to support businesses and people, suggested the Minister.

Moving forward, the Government is expected to soon issue a specific resolution aimed at ironing out the snag for business and production activities.