Public investment disbursement acceleration supports economic growth: WB

This assessment was made by experts in the May edition of the WB’s monthly Vietnam Macro Monitoring.

According to details set out in the report, industrial production improved slightly but remained weak. Specifically, the industrial production index increased marginally by 0.5 % on-year in April.

Retail sales registered an annual growth rate of 11.5% in April, comparable to figure of 11.5% on-year recorded in March. Sales of goods slowed, although sales of services continued to register robust growth, with this being largely driven by the expansion of hospitality services.

April witnessed exports and imports of goods contract by 17.1% on-year and 20.5% on-year, respectively. This is reflecting weakening global demand, especially in the United States and the EU, with exports to these two markets falling by 22.1% and 14.1% on-year, respectively, in the first four months of the year.

Consumer Price Index (CPI) inflation declined further from 3.4% in March to 2.8% in April, with food and housing being the two major contributors. Elsewhere, core inflation moderated from 4.9% in March to 4.6% in April.

Despite SBV’s policy and lending rate cuts in March coupled with ample market liquidity, credit growth decelerated to 9.2% on-year in April, dropping from 9.9 % on-year in March and 12.2% on-year in February, thereby signaling a slowing economy.

Think thanks have assessed that while FDI performance remained solid, global uncertainties continued to weigh on investor confidence.

FDI commitment reached US$3.4 billion in April, marking an increase of 46% compared to March. However, cumulative FDI commitment during the first four months of the year only reached US$8.8 billion, 17.9% lower than the same period from 2022.

The FDI disbursement amounted to US$1.5 billion in April, similar to the previous year. Meanwhile, cumulative FDI disbursement reached US$5.8 billion for the January to April period, similar to the same period from last year.

Insiders have outlined that the monthly budget balance registered a small surplus of US$0.16 billion in April, with the cumulative budget surplus to April standing at $5.6 billion. Revenue collection saw an annual decrease of 24.7% whilst public expenditure in April increased by 13.8% from the previous year.

According to WB experts, the economy is in the process of facing external headwinds amid weakening external demand continuing to weigh on exports, thereby translating into weakening industrial production.

While domestic consumption remains robust, credit growth has slowed, reflecting weak credit demand. They underscored the importance of flexible foreign exchange management in order to accommodate external conditions amid a further tightening of global financial conditions.

Moreover, economists also emphasised the need to accelerate the public investment disbursement, which could support aggregate demand and economic growth in the short term.

Most notably, ensuring investments in human capital and green infrastructure will contribute to bolstering long term economic development, they noted.