Vietnam prioritises stimulating economic growth in 2024

An uphill task

The country secured an estimated GDP growth rate of 5.05% in 2023, far below the target set by the National Assembly, due to the impact of global headwinds and pending domestic issues.

2024 is considered an important year for Vietnam to overcome difficulties and record high growth. Economic experts feared the national economy would find it hard to secure average growth of 6.55- 7% for the whole period from 2021 to 2025 as approved by National Assembly, after it only expanded 2.56% in 2021 and 5.05% in 2023, except for an amazing 8.02% rate in 2022.

Minister of Planning and Investment Nguyen Chi Dung, in his speech at the year-end session of the National Assembly last November, admitted that there is a lot of pressure on the economy towards meeting the five-year growth target. Meanwhile, the National Assembly’s Economic Committee, when examining the Government’s report, also emphasized that achieving the average growth of about 6.5-7% in the 2021-2025 period requires a great effort from the government.

That’s why shortly after a conference between the Government and localities on January 5, the Government issued a resolution on major solutions aimed at boosting national socio-economic development, with top priority to be given to accelerating economic growth coupled with maintaining macroeconomic stability and ensuring major balances of the economy. Alongside issuing the resolution, the Government also formulated growth scenarios for the four quarters of the year, with the GDP rate set to grow by 5.26-5.69% in Q1, 5.8-6.29% in Q2, 6.24-6.77% in Q3 and 6.55-7.09% in Q4.

Maintaining macroeconomic stability is a must to ensure rapid and sustainable economic development, said Deputy Minister of Planning and Investment Tran Quoc Phuong. But he also warned that a number of factors such as a new wage policy or the adjustment of prices of medical services, education, and electricity could have a strong impact on the goal of controlling inflation, not to mention the unpredictable fluctuations in petrol and oil prices.

An all-out effort needed

A group of experts from the BIDV Training and Research Institute has just developed three economic growth scenarios in 2024. Accordingly, the national economy is likely to achieve growth of 6-6.5% in the base scenario, and 6.5-7.5% in the positive scenario, providing that it develops under more favourable international and domestic conditions, and both traditional and new growth drivers are exploited more effectively.

As for the negative scenario, the growth rate may only be at 5 -5.5% if external risks increase, major economies recover slowly, geopolitical conflicts escalate, natural disasters and epidemics become complicated, and major domestic growth drivers are not effectively exploited.

Amid unpredictable global economic developments with many uncertain factors, any scenario can happen. In such circumstance, more efforts are needed to meet the target, according to Nguyen Thi Huong, director general of the General Statistics Office. This was also emphasized by Government members and local leaders at the recent Government conference with localities.

Shantanu Chakraborty, Country Director of the Asian Development Bank (ADB) for Vietnam, said public investment, domestic consumption and export recovery are the three main growth drivers of the Vietnamese economy in 2024. In his opinion, as there is still room, the fiscal policy needs to be prioritized in Vietnam, and public investment is an important solution.

The National Assembly had decided to approve more than VND640 trillion for public investment in 2024, a figure which is a bit lower than in 2023. However, Deputy Minister Tran Quoc Phuong said that if prompt and effective disbursement is accelerated, it will have a positive impact on economic growth.

In addition, Vietnam can rely on private and foreign investments to fuel economic growth. As for foreign investment, the country last year attracted over US$36.6 billion in FDI, of which nearly US$23.3 billion was disbursed.

Luong Van Khoi, deputy director of the Central Institute for Economic Management (CIEM), predicted that foreign investment attraction would continue to be a bright spot in 2024 as Vietnam is expected to lure investments into semiconductors, AI, and high technology which are considered some of the new growth drivers of the economy.

Sharing the perspective, economic expert Can Van Luc pointed out that Vietnam should bring into full play the new growth drivers, such as digital economic development, science and technology application, green growth, energy conversion, along with increasing labour productivity, stepping up economic institutional reform, and streamlining business investment environment, especially in the context of applying global minimum tax.

He also suggested promoting growth of economic locomotives, especially Hanoi, Ho Chi Minh City and Da Nang that account for one third of the country’s total GDP, in addition to stimulating the private economy.