Production activities at Rhythm Precision Vietnam Co., Ltd. Photo: PHAM HUNG

Growth drivers: old and new

The year 2023 concluded with a challenging journey for most economies worldwide, including Vietnam. High inflation, rising interest rates, and slow growth were prominent issues in the global economy in 2023. In this context of reduced aggregate demand, the production, business, investment, and trade activities of enterprises and individuals were significantly affected, especially for an open economy like Vietnam.

The recent report "Vietnam's economy in 2023 and prospects for 2024: Reforms to accelerate growth" by the Central Institute for Economic Management (CIEM) presented two economic outlook scenarios for Vietnam in 2024. According to the report, Vietnam's GDP growth in 2024 could reach 6.13% in scenario one and 6.48% in scenario two. Along with this, exports for the entire year are forecasted to increase by 4.02% in scenario one and 5.19% in scenario two. The trade surplus is projected to be US$5.64 billion and US$6.26 billion, respectively. The forecasted average inflation for 2024 is 3.94% and 3.72%.

Despite facing headwinds, Vietnam has maintained macroeconomic stability, and effective fiscal and monetary policies have helped control inflation within safe levels, with the CPI increasing by 3.25% for the entire year, meeting the target set by the National Assembly. The gradual reduction in operational interest rates provided a foundation for lowering lending rates to support production. GDP for the whole year reached 5.05%, although it did not reach the set target, in the context of continued global economic uncertainties, our country's economy in 2023 maintained a positive growth momentum, with the last quarter higher than the previous one.

2024 is recognized as a year when the world continues to face unpredictable challenges. Some traditional growth drivers for the Vietnamese economy still show signs of slowing down due to the slow pace of global economic recovery, especially in Vietnam's major export and trade markets. However, new opportunities arise from deep international economic integration, and emerging essential trends are evaluated to have the potential to provide stronger impetus for Vietnam's economic growth, including innovation, science and technology, semiconductor and artificial intelligence technologies, the digital economy, the green economy, the circular economy, and low-carbon emissions leading to net-zero goals.

Regarding the growth target for 2024 set at 6-6.5%, Nguyen Quoc Viet, Deputy Director of the Institute of Economic and Policy Research (VEPR), believed this was a challenging but achievable goal. Alongside the spillover effect of public investment, domestic consumption remains a primary driving force for growth. Viet emphasized, "Opportunities and challenges for growth are intertwined. Vietnam has demonstrated that it can go against the tide to maintain and restore sustainable growth momentum."

Agreeing with the above viewpoint, Tran Thi Hong Minh, Director of the Central Institute for Economic Management (CIEM), also believed that 2024 would pose many difficulties for the Vietnamese economy in particular and the world in general. However, with better institutional stability and reform, the Vietnamese economy can confidently expect positive results in the coming time.

What needs to be done to seize the growth opportunity?

Forecasting the economic situation in 2024, former Deputy Director of the Center for Industry and Trade Information (Ministry of Industry and Trade) Tran Quoc Phuong believed that in 2024, the prospects for the world economy would show many optimistic signs that will positively impact Vietnam. Accordingly, in 2024, inflation in major economies will start to decrease, world commodity prices are low and difficult to surge, and Vietnam's macroeconomic situation is stable with abundant commodity supply, helping to control goods. Production and exports recover thanks to an increase in external order prices (when inflation and inventory decrease in major export markets). Additionally, the FDI capital flowing into Vietnam from late 2023 will contribute to the recovery process. The government continues to implement an expanded fiscal policy for economic recovery; the expected lending interest rates will decrease, reducing capital costs for businesses. The relatively stable macroeconomy, with low inflation and low public debt, will create favorable conditions for Vietnam's economic recovery.

According to experts, in 2024, economic growth will mainly rely on the "four-horse chariot," including innovation; ensuring consistency in institutions and legal environments for economic development; promoting domestic market consumption; efficiently implementing public investment capital; and boosting exports of goods and services. Nguyen Thi Huong, General Director of the General Statistics Office, believed that to achieve the growth targets in 2024, it was necessary to stabilize the economic, political, and social situation, instill confidence in investors, and effectively control inflation. Along with this, it is crucial to maximize the effectiveness of fiscal policies and monetary policies to help businesses easily access credit capital, and policies to promote public investment, resolve difficulties and obstacles for markets related to land, real estate, construction, tourism, and capital.

Furthermore, ministries, sectors, and localities need to expedite the progress of public investment, prioritize soon-to-be-completed projects, and put into operation projects with scale and potential to maintain and expand production and business capacities. Alongside tax reduction and deferral, it is essential to effectively utilize the signed Free Trade Agreements (FTAs); vigorously negotiate and sign new FTAs; and enhance administrative procedure reforms, creating a business-friendly environment for enterprises.

"Besides, it is also necessary to effectively implement trade promotion programs in the domestic market, promote the distribution of goods through digital platforms, and e-commerce to expand domestic consumption; encourage Vietnamese people to prioritize using Vietnamese goods," emphasized Huong.