In 2024, the world economy is forecasted to remain complicated by changes and uncertainties, while the growth of the economy, trade, and investment over the world are going slowly. The International Monetary Fund (IMF) said the average GDP growth of the globe will be 2.9 per cent.

Tran Quoc Phuong, Deputy Minister of Planning and Investment

Despite calming down inflation, some big economies keep their tightened monetary policies. Some major central banks elsewhere kept interest rates high and stopped raising them from the end of last year. Public debts all over the world are increasing. Foreign direct investment (FDI) over the globe is also uncertain.

Big economies, which are Vietnam’s key trade and investment partners, are recovering slowly and unsustainably, while protective barriers are rising. In contrast with the global trend, FDI is expected to pour into Asia, especially in high-tech manufacturing. HSBC has said that Vietnam is in the top three outstanding countries (along with Singapore and Malaysia) in calling FDI into high-tech sectors.

The geopolitical situation in the world is still complicated and able to affect oil supply, and oil prices may increase in 2024. Inflation is decreasing but remains high. The IMF saw the global inflation in 2023 at 5.9 per cent, a sharp decrease compared to 9.2 per cent in 2022, and expected to decline to 4.8 per cent in 2024.

Forecasts for 2024

In Vietnam, there are some basic advantages, and also the negative impact from adverse external factors as well as internal limitations and inadequacies. Advantages and challenges intertwine during implementation of the goal of both controlling inflation and accelerating growth.

The IMF forecasted Vietnam to grow by 5.8 per cent in 2024, doubling the average growth of the world and in the top 20 of the world’s fastest growth economies. The Asian Development Bank (ADB) said Vietnam’s economy would be stable and recover soon thanks to strong domestic consumption, moderate inflation, accelerating public investment disbursement, improving commercial activities, and positive growth in numerous sectors.

Public investment, especially in infrastructure, is one of the major driving forces. FDI mobilisation is still a bright spot, and Vietnam is still one of the priority destinations. Services are expected to expand based on tourism development, and relevant service recovery.

Agriculture will benefit from the increase in food prices, and domestic consumption will be supported by moderate inflation to grow in the year. Processing and manufacturing are major driving the economy, while exports are improving based on the recovery of the US and EU economies. However, exports and imports still face some challenges, and enterprises see some issues. There is no demand stimulation, so consumption is not strengthened strongly. Inflation and prices need to be controlled. Vietnam cannot avoid the negative impact of the global economy, along with such internal challenges as the soar of unemployment rate, and prices, and the decrease in income, so purchasing ability is going down.

Economic growth of Vietnam in 2024 is expected to be at 6 per cent if the geopolitical situation and the world economy do not get too worse than in 2023, some driving forces can develop as expected. If there are uncertain changes in the international and local situation with negative impacts, Vietnam’s GDP growth may reach 5.5 per cent only in 2024.

The growth could be 6.5 per cent if the geopolitical situation and the global economy is better or similar to 2023, some driving forces develop better than expected, and the direction and supportive policies of the government are more effective. This is a challenging scenario, requiring great efforts in managing the macroeconomy.

Some international organisations also provided a forecast for Vietnam’s growth in 2024. The World Bank outlook is at 5.5 per cent, IMF at 5.8 per cent, and ADB at 6 per cent. So the GDP growth in the scenario at 6 per cent and the target set forth by the National Assembly at 6-6.5 per cent is reasonable and possible.

Recommended solutions

To reach the goal set forth, macroeconomic management in 2024 will focus on institutional and business environment improvement with three major tasks: completing legal regulations and policies to remove difficulties for market input factors; simplifying business conditions; and developing infrastructure for production, promotion of goods and services, and implementing socioeconomic development plans.

In terms of fiscal policies, the Ministry of Planning and Investment will accelerate public investment disbursement as a motivation for the mobilisation of other private capital. We will pilot the implementation of appropriate mechanisms to mobilise resources to create breakthroughs in infrastructural development, especially roads and railways.

It is necessary to continue to effectively implement policies on exemption, reduction, and extension of taxes, fees, charges, and land rent that have been promulgated, as well as consider and propose additional policy bailout in 2024 to continue to remove difficulties for production and business. The VAT refund policy should be carried out effectively and promptly, with simple and convenient procedures to support the production and business capital of enterprises.

In the monetary policy, we should direct credit capital flows into production and business, priority sectors, and economic growth drivers, as well as create the best conditions for individuals and businesses to access bank credit.

It is necessary to manage interest rates following macroeconomic balance, market movements, and monetary policy goals, flexibly managing exchange rates to respond to external shocks, along with other monetary policies.

We will drastically restructure the system of credit institutions, handle bad debts, handle poor-performance banks, perfect legal regulations on managing bad debts, and ending cross-ownership, appropriately control and regulate credit for potentially risky areas, and ensure liquidity and system safety.

In developing enterprises and trade, we highlight some recommendations, including removing difficulties, strengthening processing and manufacturing industries; strongly recovering and boosting industries, particularly semiconductor manufacturing. Large-scale projects with high technologies and spillover ability should accelerate their progress.

The global minimum tax is now being applied in Vietnam. Thus, the government will soon issue policies to welcome investors and support businesses to seize opportunities for global supply chains’ relocations, and to call multinational corporations to pour money into sectors such as semiconductors and electronic components, and human resources training.

We should continue to restructure and enhance performance of state-owned enterprises, especially large-scale projects in major sectors, as well as amend the Law on Management and Use of State Capital in Production and Business at Enterprises. The domestic market should also be developed well, in addition to extending and diversifying international markets and enhancing the performance of trade promotion activities and effectiveness of free trade agreements in new markets like the Middle East and Africa.