29-6-2024 (HANOI) Vietnam’s economy demonstrated resilience in the second quarter, with economic growth accelerating on the back of robust exports, according to government data released on Saturday. However, rising inflation continues to pose a challenge for the Southeast Asian country.
The General Statistics Office (GSO) reported that gross domestic product (GDP) is estimated to have expanded by 6.93% in the second quarter compared to the same period last year, a faster pace than the 5.87% growth recorded in the first quarter. Overall, the economy expanded by 6.42% in the first half of 2024.
Vietnam, an important exporter of smartphones, electronics, and garments, is striving to shore up business activity after missing its growth target last year due to weak global demand and power shortages.
“Vietnam’s socio-economic situation continues a positive trend, with each quarter being better than the previous one,” the GSO stated. However, it acknowledged that “the country’s economy and society continue to face many difficulties and challenges, amid external risks and uncertainties… achieving the growth target of 6.0-6.5% in 2024 is a big challenge, requiring the joint efforts from all forces.”
The country’s exports in the first half of 2024 rose by 14.5% year-on-year to $190 billion, while industrial production increased by 10.9% compared to the same period last year, according to the GSO.
Earlier this week, Prime Minister Pham Minh Chinh expressed confidence that second-quarter GDP growth would exceed the first quarter’s pace and stated that policy would continue to prioritize growth to meet this year’s target of 6.0%-6.5%. He affirmed that Vietnam would maintain a flexible monetary policy, with the aim of further reducing banks’ lending interest rates, cutting fees, and boosting public investment.
Despite the positive economic indicators, inflation remains a pressing concern. The International Monetary Fund (IMF) expects Vietnam’s economic growth to be close to 6% this year, supported by strong external demand, resilient foreign investment, and accommodative policies. However, the IMF has warned that downside risks are high and cautioned that if exchange rate pressures persist for longer, it could lead to a larger pass-through to Vietnam’s domestic inflation, given the easy monetary conditions.
Indeed, inflation pressures are building, with Vietnam’s consumer prices in June rising by 4.32% year-on-year, approaching the government’s inflation target ceiling of 4.5% for the year. Average consumer prices in the first half of 2024 rose by 4.08% compared to the same period last year, according to the GSO.
The agency stated that it would closely monitor price movements and adjust prices of electricity, medical, and education services in accordance with the real situation to minimize the impact on inflation. However, a recent government decision to raise base salaries for state employees by 30% and pensions for retirees by 15% from July 1 is expected to add further upward pressure on inflation.
