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Sunday, July 21, 2024

WB: Public investment should remain aggregate demand driver

The Saigon Times

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HCMC – Vietnam should continue supporting demand through public investment, the World Bank (WB) recommended in a new report.

This advice comes amid a rising U.S. dollar and exchange rate pressure if interest rates are lowered to boost investment.

“While external demand has been recovering, the performance of domestic demand, especially consumption, remains weak. The authorities have taken some measures to support the economy. Continued support of aggregate demand through capital expenditures is recommended,” the WB said in its report.

Its May 2024 macroeconomic update showed a significant rise in industrial production due to improved exports. The index of industrial production (IIP) grew by 2.6% against April, driven by machinery and equipment manufacturing, which surged by 9.8%. Computer and electronics production increased by 2.2%. The IIP rose by 8.9% year-on-year due to stronger exports and a low base effect from the previous year.

Exports to the U.S., the EU, China, ASEAN, Hong Kong and South Korea each increased by over US$1 billion compared to the first five months of 2023, according to the General Department of Vietnam Customs.

The WB reported that the manufacturing purchasing managers’ index (PMI) held steady at 50.3 in May. An increase in new orders points to faster production growth in the coming months.

Merchandise exports rose by 6.5% in May, led by high-tech products, reversing a decline in April. Imports climbed by 9.5%, following a 0.6% drop in April. Year-on-year, exports and imports grew by 15.8% and 29.9%, respectively, partly due to a low base in 2023. Higher import growth reduced the trade surplus in May but indicated rising export demand.

Headline inflation held steady, while core inflation edged down. The consumer price index (CPI) in May was 4.4% higher year-on-year, the same as in April.

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