HCMC – The Asian Development Bank (ADB) has revised down the growth forecast for Vietnam from 6.5% to 5.8% in 2023 and from 6.8% to 6.2% in 2024.
The economic slowdown was evident in the first half of 2023, with the growth rate dropping to 3.7% compared to 6.5% recorded in the same period in 2022. This decline was primarily attributed to weakened external demand and sluggish manufacturing output, which grew by only 0.4%, the lowest in 12 years for the same period.
The Purchasing Managers Index (PMI) has consistently remained below 50 since March 2023, signaling a contraction in the sector. Export-driven manufacturing has been particularly affected, leading to the closure of numerous businesses due to weaker trade growth.
Challenges faced by the industrial production sector, such as power outages in the northern region and issues in the real estate sector, further compounded the economic slowdown. Concerns about corporate bond markets and banks’ potential exposure to high property risks resulted in a credit crunch that impacted the construction industry.
However, domestic travel has provided a positive boost to the economy, driving consumption and contributing to an 11% year-on-year increase in retail sales during the first half of 2023.
In terms of inflation, Vietnam’s forecast has been adjusted to 4.0% for both 2023 and 2024. This revision is primarily influenced by declining global energy prices and a stable food supply.
Looking at the broader Southeast Asian region, the economic outlook has been slightly revised downward, with growth projections of 4.6% in 2023 and 4.9% in 2024. The adjustment is attributed to decreased demand for manufactured exports in the global market.
The ADB is not the only organization revising down its economic growth forecast for Vietnam. The International Monetary Fund (IMF) and the United Overseas Bank (UOB) have also adjusted down their projections, citing significant challenges in achieving Vietnam’s target GDP growth of 6.5%.
According to the IMF, Vietnam’s GDP is now expected to expand by 4.7% this year, a decrease of 1.1 percentage points from its previous projection. The slowdown in the first half of the year was primarily driven by a substantial reduction in external demand, significantly impacting exports.
For the same reason, UOB has revised down its growth forecast for Vietnam to 5.2% from the initial projection of 6% at the beginning of the year.
