“Vietnam’s economy showed robust recovery in the first half of 2024 and continues to maintain momentum despite global uncertainties,” said ADB country director for Vietnam Shantanu Chakraborty. “This steady recovery has been driven by improving industrial production and a strong rebound in trade.”

According to the Asian Development Outlook September report released on September 25, the industrial sector continues to be a primary driver of growth, with external demand for major electronics fuelling production. Vietnam’s recovery has also been supported by a rebound in the services sector and stable agricultural output. However, domestic demand remains sluggish, and subdued global economic prospects add uncertainty.

Inflation is expected to remain moderate at 4 per cent for 2024 and 2025, although geopolitical tensions, including the conflict in the Middle East and the Russian invasion of Ukraine, could impact oil prices and potentially boost inflation.

The report highlighted several downside risks that could slow the country’s growth momentum. External demand in major economies will remain weak, while geopolitical tensions and uncertainties related to the US election in November could lead to trade fragmentation, adversely affecting exports, manufacturing activity, and employment.

Raising domestic demand will require stronger fiscal stimulus measures such as accelerating public investment implementation, while maintaining low-interest rates. Coordinated policy measures are essential to economic recovery, given relative price stability and weak demand.

Vietnam’s monetary policy will continue to aim for both price stability and growth, despite limited policy space. However, the heightened risk of non-performing loans due to continued regulatory relaxation on loan extensions limits the potential for further monetary easing. Any additional loosening of monetary policy should be closely coordinated with an expansionary fiscal policy, along with accelerating institutional reforms to support the economy.

Vietnam on course to surpass 2023 growth results While the Vietnamese economy is projected to see lower-than-expected growth this year due to lingering headwinds caused by global geopolitical risks, the overall outlook still remains upbeat, according to analysis.