GDP growth 6% max this year, ministry predicts

The ministry discussed three potential GDP outcomes for 2023.

The lowest prospect mentioned would see GDP growth at 5% for the entire year. In this case, GDP in the last quarter would have to reach 7%, according to ministry analysts.

The middle of the road scenario would see GDP round out the year at 5.5%, in which case final quarter GDP growth would need to reach 8.8%.

The most optimistic scenario would be GDP growth ending the year at 6%, but in order for that to happen, GDP growth in the fourth quarter must reach 10.6%. This would be a challenge, according to the ministry, as GDP growth in the third quarter reached only 5.33%.

Ministry analysts have said that economic growth in the final quarter would depend on how quickly industrial production recovers, especially in manufacturing and processing. Another factor is demand from Vietnam’s major export markets, as well as tourism and spending within the country at the end of the year and for the upcoming Lunar New Year holiday.

"All the scenarios prove to be challenging, requiring units and localities to utilize their inner power and outside opportunities to reach the highest degree of growth in the fourth quarter, creating momentum for 2024," said a spokesperson from the ministry.

All the GDP growth scenarios outlined by the ministry were lower than the 6.5% intended target set by the government and the National Assembly.

Experts at the Vietnam Economic Forum, which was held earlier this month, also said Vietnam’s GDP growth this year would likely not exceed 6%, as the main drivers of economic growth have slowed in the first eight months.

The ministry also reported that production and businesses are facing challenges regarding markets, money flows and administrative procedures. These issues have been recognized and are in the process of being fixed, but changes would be unlikely in the short-term, according to the ministry.

Exports in the first nine months reduced by 8.2%, while imports also dropped by about 14%. Major export goods such as phones, components, textiles and shoes, all saw drops. Demand from certain major markets, like China, Japan, the U.S. and the EU, has improved, but the situation is still not ideal.

Domestically, the market is recovering slowly, with high levels of leftover products in the manufacturing and processing sectors. Credit access remains difficult for both businesses and everyday people. Businesses' bond issuance had also dropped by over 60% by mid-September compared to the same period last year.

"The challenges for businesses and the economy have directly impacted and increased burdens on the operation of the macro-economy," the ministry spokesperson said.

Non-state sector investments in the third quarter increased by 2.5% compared to the same period last year, and saw a 9% increase in general for the first nine months of this year. Registered capital for newly created businesses showed a decline, which reflects the short-term's challenging economic prospects.

The real estate and business bonds markets continue to harbor risks and challenges, which requires close monitoring, especially following bankruptcy cases for certain Chinese real estate companies.

The ministry outlined certain solutions to bolster growth, including tax and cost reductions in 2024. One major proposal was for an effort towards the mobilization of resources both inside and outside of Vietnam for investment and development, including the completion of mechanisms to attract investment and FDI projects.

The ministry also suggested taking advantage of the newly established comprehensive strategic partnership with the U.S. to boost new drivers of growth, attract investment from multinational corporations and create ecosystems for the manufacturing of chips, semiconductors and components. This would include the construction of centers for maintaining aviation equipment in Vietnam, as well as for the manufacture of chips and semiconductors.

Also at the meeting, Prime Minister Pham Minh Chinh said that while economic situations have improved over time, there are still challenges, and units and localities must embrace policies to respond to them properly and boost drivers of growth.