Vietnam's GDP Growth Potential: Projections and Insights for 2024

Vietnam's GDP is projected to near 7% growth in 2024, following four consecutive quarters of exceeding potential growth. The Central Institute for Economic Management (CIEM) forecasts two scenarios. Key factors include stable global conditions, improved domestic policies, and effective reforms. Challenges include inflation pressure, enterprise connectivity, and regulatory reforms. Addressing these is crucial for sustaining economic momentum.

Steady Growth for Four Consecutive Quarters

Experts from the Central Institute for Economic Management (CIEM) predict that Vietnam's GDP could approach a 7% growth rate by the end of 2024. This optimistic forecast follows Vietnam's exceptional economic performance, which has surpassed potential growth for four consecutive quarters.

Economic Projections and Scenarios

Presenting the report at the seminar "Vietnam Economy in the First Half of 2024 and Full Year Outlook: New Drivers for Quality Growth" on July 9, Mr. Nguyễn Anh Dương, Head of the General Research Department at CIEM, laid out two updated macroeconomic scenarios for 2024.

Scenario 1 forecasts a GDP growth rate of 6.55% for 2024. Export growth is expected to increase by 9.54% compared to 2023, with the average CPI rising by 4.31%. The trade balance is projected to maintain a surplus of $5.7 billion.

• Assumptions for Scenario 1: Global economic conditions remain consistent with international assessments, and Vietnam continues its policy efforts as outlined in the first half of 2024.

Scenario 2, the more optimistic projection, estimates GDP growth at 6.95% for 2024. Exports are anticipated to rise by 11.64% compared to 2023, with the average CPI increasing by 4.12%. The trade balance is expected to reach a surplus of $7.3 billion.

• Assumptions for Scenario 2: Positive shifts in the global economy, such as rapid global growth recovery, increased investment in Southeast Asia, including Vietnam, and a robust recovery of the global supply chain. Additionally, effective economic reforms and policy implementations in Vietnam are assumed, leading to maximized public investment and credit absorption.

Long-Term Growth Potential and Challenges

CIEM suggests that Vietnam can harness new growth areas such as green finance and night-time economy in major cities. However, current limitations need to be addressed, such as the absence of official evaluation criteria for green finance and regulatory gaps. Similarly, for the night-time economy, the lack of attractive tourist products and economic effects needs attention.

Short-Term Concerns for H2 2024

The CIEM experts also highlight several issues that need attention in the latter half of 2024:

1. Inflation Pressure: With rising basic wage and regional minimum wage, there is a risk of "cost-push" inflation if timely and coordinated measures are not implemented. Additionally, the risk of escalating US-China trade tensions, potential inflation in the US, and the possibility of the Federal Reserve maintaining high interest rates must be carefully monitored.

2. Domestic and FDI Enterprise Connectivity: The slow improvement in the connection between domestic enterprises, especially SMEs, and foreign-invested enterprises affects their contribution to and benefit from exports.

3. Adaptation to New Trends: The awareness and capacity of enterprises to adapt to new trends such as digital and green transitions remain relatively limited.

4. Regulatory Reforms: The process of reforming business regulations and conditions has not kept pace with requirements and expectations, potentially impacting the business community's ability to capitalize on economic opportunities.

Conclusion

As Vietnam continues to navigate its economic landscape, it is essential to closely follow the upcoming changes in the global and domestic economic environment. Businesses should stay informed and engaged with local regulatory authorities to ensure compliance and maximize opportunities in a rapidly evolving market.