WB experts at the press conference (Photo: VNA)

Addressing a press conference held by the WB on the same day, World Bank Lead Economist for Vietnam Andrea Coppola said the country’s exports are recovering, and consumption and private domestic investment growing more gradually.

Real exports are expected to grow by 3.5% in 2024, reflecting a gradual improvement in global demand. In addition, a turnaround in the real estate sector is anticipated later this year and next year, bolstering domestic demand as investors and consumers regain confidence, he said.

Senior Economist at the WB in Vietnam Dorsati Madani said the forecast is based on the assumption that exports of manufactured industrial goods will recover significantly in 2024 thanks to a rebound growth of 8.5% compared to the same period last year in the fourth quarter of 2023 and a 17.2% increase year-on-year in the first quarter of 2024; and an improving global demand.

Export of manufactured industrial commodities is expected to continue recovering in the next two years. The real estate market is predicted to transition towards an upward trend in late this year and early 2025, as the frozen bond market loosens and the Land Law takes effect from January 2025.

Real total investment and private consumption are projected to increase by 5.5% and 5% in 2024, respectively.

According to Dorsati, inflation is forecast to increase slightly to 3.5% in 2024 from an average of 3.2% last year, and then stabilise at around 3% in 2025 and 2026. This projection is based on expectations of stable energy and commodity prices.

The economist also warned of potential downside risks both domestically and internationally that could negatively impact the economic outlook, saying that due to Vietnam's economic openness to the global economy, it could be vulnerable to effects of lower-than-expected global growth, such as with major trading partners including the US, the European Union, and China.

She underscored the importance of sustained fiscal policy support to reinforce the recovery, and recommended expediting infrastructure investment projects financed by public resources, saying that this will help further stimulate the economy, with an additional potential 0.1 percentage point of GDP growth for every 1 percentage point increase in public investment as a share of GDP.

According to Dorsati, continued weak revenue collection and increased spending, including the planned salary increases for civil servants and accelerated investment public investment, are expected to widen the fiscal deficit to 1.6% of GDP in 2024, before narrowing to 1.1% in 2025, in line with the country’s Fiscal Strategy for 2021-2030.

Ensuring the stability of the financial sector remains paramount, with a focus on managing potential risks associated with increasing bad debts, including due to declining asset values in the real estate market. Capital buffers of commercial banks are relatively thin, and the real estate market’s downturn could further depress their capital, she said.

Dang Quang Vinh, Senior Private Sector Specialist at the WB, said the report presents several recommendations aimed at supporting innovative startups, thus contributing to Vietnam's productivity growth.

He underlined the need to enhance the contribution by the academic and public research community through providing opportunities for universities and public research institutions to support startups.

The public research sector can play a larger role by modernising the intellectual property and technology transfer framework, rewarding research efforts with commercialisation potential, and building the capacity of universities and research institutions to effectively transfer technology to startups, he went on.