Speaking with The Gioi & Viet Nam Newspaper, Dr. Phan Thanh Chung, Lecturer of Economics, Faculty of Business, RMIT University Vietnam, said that financial institutions such as the IMF and HSBC have positive assessments of Vietnam's economic growth in 2024 based on reform efforts, the economy's strategic position in the global supply chain and a strong domestic market.

Dr. Phan Thanh Chung, Lecturer in Economics, School of Business, RMIT University Vietnam.

As 2023 ends, what is your assessment of the development and growth of Vietnam's economy?

Last year, Vietnam's economy demonstrated its resilience with an estimated GDP growth of 5.05%. Although lower than the target of 6.5%, it is still quite impressive compared to the global average growth rate.

Vietnam maintained macroeconomic stability, effectively managing inflation and public debt. Despite global inflationary pressures, the consumer price index (CPI) increased by only 3.25% over the past year. The effectiveness of fiscal and monetary policies was clearly demonstrated, especially through tax reductions and interest rate cuts, supporting businesses and consolidating economic stability.

Disbursement of public investment capital increased significantly, reaching about VND549.1 trillion in 11 months, up 22.1% compared to 2022. Foreign direct investment (FDI) is one of the main growth drivers, reflecting that Vietnam continues to be an attractive investment destination despite the global economic downturn. In 2023, FDI into Vietnam reached a record of US$36.6 billion, up 32.1% compared to the previous year. This positive result is partly due to increased investment from major partners such as Singapore, China and Japan, as well as proactive policies by the Government to support business activities and improve the investment environment.

In addition, Vietnam’s deep integration into the global value chain through free trade agreements (FTAs) has contributed to this achievement. Vietnam’s foreign affairs, especially the upgraded partnership with the United States, has opened up many new avenues for economic, trade and investment development, further enhancing the country’s global position and economic prospects.

The agriculture, forestry and fisheries sectors contribute significantly to the economy, with Vietnam being a major exporter of commodities such as rice, coffee and seafood. Growth in these sectors is due to improvements in both the quantity and quality of products.

In addition, technological advances, particularly in manufacturing and digital services, have contributed to the economy by promoting a shift to higher value-added industries.

Besides the positive highlights, what do you think are the weaknesses and challenges facing the Vietnamese economy? What should the management agency and the business community do to overcome these difficulties?

A key challenge is the modest growth in the services sector, which has historically contributed significantly to growth. The slowdown in services growth, coupled with global economic uncertainty, has posed a significant challenge to sustaining the growth momentum achieved in previous years. The global economic environment, with its uncertainties and the risk of recession, has impacted Vietnam’s export-oriented economy, creating additional hurdles.

To mitigate these challenges, the Vietnamese government and business community need to adopt a multi-pronged approach. Diversifying the economy, especially beyond the services sector, can be key. Other sectors such as manufacturing, technology and agriculture need to be promoted, which can provide new growth opportunities.

Improving the business environment to attract more FDI and support local businesses is also necessary. The government can focus on policy reforms to reduce bureaucracy, provide financial incentives and improve the ease of doing business.

In addition, strengthening the domestic consumption market can offset some of the vulnerability to global economic fluctuations. Through these measures, Vietnam can aim to maintain its growth trajectory and address the challenges it faces.

2024 continues to be a difficult year for the global economy. What is your assessment of Vietnam's economic prospects this year? What will be the growth drivers?

Vietnam's economic outlook for 2024 is cautiously optimistic, with some forecasts suggesting a possible GDP growth target of around 6%.

The International Monetary Fund (IMF) predicts that Vietnam will reach a GDP of 5.8% by 2024, placing it among the top 20 countries with the highest growth rate globally. Meanwhile, HSBC Bank forecasts this figure to be up to 6.3%, showing that Vietnam has the potential to outperform many countries.

These positive outlooks are based on reform efforts, the economy’s strategic position in global supply chains, and a strong domestic market. However, it should be noted that global economic uncertainties may pose challenges, requiring revisions to these forecasts.

Vietnam's main growth drivers in 2024 are expected to be public investment, consumer spending and import-export recovery.

Public investment can continue to play an important role in stimulating economic activity, especially through infrastructure and key development projects. Consumer spending, driven largely by a growing middle class and rising disposable income, will boost domestic demand. Furthermore, the recovery in import and export activities, supported by FTAs ​​and Vietnam’s strategic position in the global supply chain, will contribute significantly to economic growth. A focus on diversifying export markets and products will be instrumental in mitigating risks associated with global economic fluctuations.

In addition, Vietnam’s continued efforts to improve its business environment, attract FDI, and invest in technology and innovation are likely to further strengthen the country’s economic resilience and growth. Therefore, despite the challenges posed by the global economy, Vietnam’s economy has a solid foundation and strategic momentum to continue growing in 2024.

Vietnam's economy has a solid foundation and strategic momentum to continue growing in 2024. Illustrative photo. (Source: Vietnam Insider)

In that context, what recommendations do you have for management agencies and the business community to unlock resources, promote advantages, and develop sustainably?

To achieve the 2024 target, Vietnam should adopt a flexible approach, inspired by the lessons learned from other countries.

Similar to the European Central Bank’s approach, Vietnam should closely monitor international economic trends to adjust its macroeconomic policies effectively, focusing on balancing inflation control and growth. This includes adjusting its interest rate and exchange rate strategies.

In addition, it is necessary to utilize a combination of public investment, FDI and private investment, similar to Singapore's investment strategy, to balance the budget and promote growth.

Economic growth needs to be stimulated through both traditional means such as public investment in infrastructure projects (e.g., the Ho Chi Minh City metro rail project) and new drivers such as the digital economy, inspired by Estonia’s e-residency program. Similar to Canada, Vietnam needs to maintain a balance between monetary, fiscal and macroeconomic policies to support sustainable and stable growth.

In addition, Vietnam can learn from Korea’s experience to support businesses affected by declining exports and investment by increasing the use of FTAs, while promoting administrative reforms as New Zealand has done. Economic restructuring should focus on state-owned enterprises and financial institutions, inspired by China’s efficiency-enhancing reforms.

Developing strategies to enhance economic resilience and independence in the face of global change is important, as Japan did in diversifying its energy sources after the Fukushima disaster.

Finally, improving the productivity, quality and competitiveness of the economy through the development of different types of markets and domestic and international market integration, as seen in Germany's Industry 4.0 Strategy, will be crucial for Vietnam's sustainable and stable growth in the context of global integration.