The General Statistics Office (GSO) last week reported that the economy increased 5.05 per cent for the whole of 2023, lower than the target of 6-6.5 per cent initially set by the National Assembly (NA).

After growing 3.32 per cent on-year in Q1 2023, the Vietnamese economy bounced back to 4.14 per cent on-year in Q2, 5.33 per cent on-year in Q3, and 6.72 per cent in Q4.

In 2023, the agro-forestry-fishery sector expanded 3.83 per cent, while the on-year rates of the industry and construction sector and the service sector were 3.74 and 6.82 per cent, respectively.

“The economy has been gradually recovering, and the 5.05 per cent growth rate is quite positive, despite being lower than the set goal,” the GSO said.

The GSO said that in 2023, business confidence kept growing. The Vietnamese economy witnessed over 159,300 enterprises newly established, with total registered capital of $64.2 billion and employed 1.05 million individuals – up 7.2 per cent in the number of enterprises, down 4.4 per cent in capital, and 7.3 per cent in workers, all as compared to those in the same period last year.

“Despite difficulties, production and business activities continued to recover, especially the service sector, which is forecasted to be more active going forward,” said Nguyen Thi Huong, general director of the GSO.

Vu Hong Thanh, Chairman of the NA’s Economic Committee, said that the socioeconomic situation was continuing its trend of positive recovery, with it becoming better month after month, and quarter after quarter.

“Though being lower than the set target of 6-6.56.5 per cent, it still remains relatively higher than in many nations in the region and wider world,” Thanh said.

Many international organisations have set a positive economic growth target for Vietnam, including the International Monetary Fund (5.8 per cent), the World Bank (5.5 per cent), the Asian Development Bank (5.2 per cent), Moody’s (5.6 per cent), and Fitch Solutions (5 per cent).

Paulo Medas, mission chief for Vietnam of the International Monetary Fund (IMF), told VIR that Vietnam’s economic performance compares relatively well, as global growth is expected to remain modest.

“Even in Asia, which accounts for most of the world’s growth, Vietnam’s performance also compares well within the region,” Medas said. “The country’s growth in 2023 is a bit higher than the average growth estimated for other ASEAN countries, and the IMF’s October 2023 World Economic Outlook projects growth at 4.2 per cent for the bloc.”

The IMF expects that Vietnam’s growth performance will be stronger than the average for the ASEAN region in 2024.

“Global growth is likely to remain modest by historical standards, but overall conditions for Vietnam will be more benign, allowing for a stronger recovery,” Medas said.

“We project that growth in 2024 will rise to 5.8 per cent. This reflects several factors. For instance, a pickup in exports will help manufacturing (and other exporting sectors) to gain some steam after the downturn in 2023. This should also contribute to a stronger investment and consumption performance.”

Global analysts FocusEconomics also said that it is seeing a gradual recovery of the Vietnamese economy.

“GDP growth saw the strongest result since Q4 of 2022 in Q3 at 5.3 per cent on-year, bolstered by well-performing industrial, services, and agriculture sectors,” FocusEconomics said. “Turning to Q4, our panel expects growth to improve when compared to Q3, though the economy will likely miss the government’s 6.5 per cent target for 2023 as a whole.”

It underlined that Vietnam would be among the fastest-growing ASEAN economies in 2024 (see chart). “Improving external demand conditions will accelerate industrial output and goods exports, and the services sector is set to rebound as tourism recovers,” FocusEconomics said.

“A notable rise in public spending should further aid activity. That said, the economic deterioration in key partner China is a downside risk. FocusEconomics panellists see Vietnam’s GDP expanding 5.9 per cent in 2024, and 6.5 per cent in 2025.”

Commenting on the economy’s performance, Minister of Planning and Investment Nguyen Chi Dung said that in 2023, many key driving forces for economic growth have slowed down. “Export and import turnover has decreased by 4.4 and 8.9 per cent, respectively, while the bad debt ratio in the economy tends to rise (by late July, the bad debt ratio sat at 3.56 per cent, far higher than the set target of under 3 per cent),” Minister Dung said.

In a report submitted to the NA last month, the government underlined a series of economic hurdles for the next few years. “Macroeconomic stability remains fragile due to massive external pressure. Industrial production is recovering very slowly, especially the processing and manufacturing sector,” the report said. “Business and production activities are still bogged down in struggles, with a rise in the number of enterprises with bankruptcy and dissolution, and many businesses lack orders.”

According to the GSO, in 2023, 89,100 businesses halted operations – up 20.7 per cent as compared to the previous year; 65,500 enterprises stopped operations and waited for dissolution procedures – up 28.9 per cent; and 14,400 enterprises completed such procedures.

“Domestic production still largely relies on imported materials, while the demand in the domestic market has narrowed down, and Vietnam’s exports to key markets have all suffered from an on-year reduction,” the governmental report stated.

The government has set a target of GDP growth of 6-6.5 per cent in 2024 year, based on the expectation that the domestic business and production activities will strongly bounce back, as global demand, production, and consumption also witnesses a strong recovery.

“To hit the new economic growth target, we’ll continue to prioritise and strongly promote growth pertaining to stably maintaining macroeconomic stability, controlled inflation and ensuring major balances of the economy,” the government told the NA.

Prime Minister Pham Minh Chinh said, “More major solutions will be used to strongly spur on growth propellants including investment, consumption, and exports, while effectively taking advantage of opportunities from the domestic and international markets. All ministries, sectors, and localities have to make greater efforts to weather difficulties, and spur on development of business and production activities.”