31-12-2023 (HANOI) Vietnam’s economic growth decelerated to 5.05% this year, down from 8.02% in the previous year, according to official data released on Friday. The slowdown was attributed to weak global demand and a stagnant public investment climate amid an intensified anti-corruption crackdown.
The gross domestic product (GDP) growth for the year fell below the government’s target of 6.5% and marked a dip from the average growth of 5.87% over the last decade, as reported by the General Statistics Office (GSO).
As a key regional manufacturing hub reliant on trade, Vietnam faced a 4.4% decline in exports in 2023, amounting to $355.5 billion. Smartphone shipments, a significant foreign currency earner, dropped by 8.3%, as highlighted in the GSO report.
The industrial production index for 2023 showed a modest increase of 1.5% from the previous year, while average consumer prices rose by 3.25%. Retail sales, however, saw a positive uptick, rising by 9.6%.
Despite falling short of the government’s growth target, the GSO viewed the results positively, placing Vietnam among the fastest-growing economies in the region and globally.
Imports for 2023 experienced an 8.9% decline, reaching $327.5 billion, resulting in a trade surplus of $28 billion for the year. While a substantial trade surplus supports the dong currency, a significant drop in imports could signal a slowdown in manufacturing activities.
In an effort to stimulate economic growth, Vietnam’s central bank implemented four policy rate cuts throughout the year, reducing the refinance rate and discount rate by a cumulative 150 basis points each. However, credit growth remained weaker than the 14% target.
By the end of November, overall credit growth in the economy was 8.2%, with the State Bank of Vietnam noting a slow economic recovery and weak demand for loans.
To counter the decline in exports, Vietnam extended a value-added tax cut to bolster domestic consumption. Authorities also sought to expedite public investment, primarily in infrastructure. However, public investment faced hurdles in 2023 due to an intensified anti-corruption campaign, hindering activities.
In the fourth quarter of the year, GDP grew by 6.72% compared to the same period the previous year. Capital Economics expressed skepticism about the sustainability of this momentum, citing potential weaknesses in exports and a pullback in lending by commercial banks in response to a rise in non-performing loans.
Capital Economics anticipates economic struggles in 2024, forecasting growth at 6.0%. It also suggests further rate cuts by the central bank next year, with inflation likely to remain within the target range.
In November, Vietnam’s legislature approved government targets for 2024, setting GDP growth between 6.0% and 6.5%, and inflation in the range of 4.0% to 4.5%.
