Vietnam's Economic Growth Slows to 5.05% in 2023 Due to Falling Exports

tendata blogTrade Trends News

ten data blog04-01-2024

-GDP growth slows to 8.02% in 2022

-Official estimates show growth accelerated in fourth quarter

-Banking problems spark speculation of new rate cuts next year


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Vietnam's economic growth slowed to 5.05 percent this year from 8.02 percent last year due to weak global demand, intensified anti-corruption efforts and stagnant public investment, official data showed Friday.


According to data released by the General Statistics Office (GSO), this year's gross domestic product (GDP) growth rate is lower than the government's target of 6.5 percent and lower than the average growth rate of 5.87 percent over the past decade.


Vietnam is a regional manufacturing center that relies heavily on trade.GSO said in its report that exports fell 4.4 percent from last year to $355.5 billion in 2023, with shipments of smartphones, the biggest source of foreign exchange earnings, falling 8.3 percent.


According to the GSO, the index of industrial production rose 1.5 percent in 2023 from last year, and average consumer prices for the year rose 3.25 percent. Retail sales grew by 9.6 percent.


The GSO said, "Although this year's growth is lower than the government's target of 6.5 percent, it is still a positive result, placing Vietnam among the fastest growing economies in the region and the world."


Imports fell 8.9 percent to $327.5 billion in 2023, resulting in an annual trade surplus of $28 billion, the report said. The large trade surplus is supportive of the Vietnamese dong currency, but the sharp decline in imports could indicate a slowdown in manufacturing activity in the coming months.


In an effort to boost economic growth, China's central bank has cut its policy rates four times this year, with the refinancing rate and discount rate accumulating a total of 150 basis points each, but credit growth is still well below the 14 percent target.


Data from Vietnam's central bank, the State Bank, showed that the economy's overall credit growth rate stood at 8.2 percent as of the end of November, with the bank stating that "the economy is still facing difficulties of slow economic recovery and therefore demand for credit loans is weak."


To compensate for falling exports, Vietnam decided to extend VAT tax cuts to boost domestic consumption, while authorities sought to accelerate public investment, mainly in infrastructure.


But public investment has stalled this year as China's "fiery furnace" anti-corruption campaign intensified, often paralyzing activity.


According to the Ministry of Planning and Investment, public funds spent in the year to the end of November were estimated at 461 trillion rupiah ($18.98 billion), reaching only 65 percent of the target set for the year.


GDP grew by 6.72 percent year-on-year in the fourth quarter of this year, faster than the 5.47 percent growth in the third quarter and the 5.92 percent growth in the same period last year, data from the statistics office showed. Third-quarter GDP growth was revised upward from 5.33 percent.


However, the momentum in the fourth quarter is unlikely to be sustained if exports weaken and commercial banks scale back lending due to a sharp increase in non-performing loans, said Capitol Macro.


"We see the economy struggling in 2024," it said in a report, and forecast growth of 6.0 percent next year.


The central bank is likely to cut interest rates further next year and inflation is likely to stay within its target range, Capital Macro said, but added that the consensus is not expected to change.


Vietnam's legislature in November approved the government's targets of 6.0% to 6.5% GDP growth and 4.0% to 4.5% inflation next year.




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