Vietnam’s economic growth has experienced a significant slowdown in 2023, dropping to 5.05% from 8.02% the previous year. This disappointing performance was influenced by weak global demand and a decline in public investment due to an intensified anti-graft campaign. The country’s export sector, which heavily contributes to its overall GDP, witnessed a decline of 4.4% in 2023. Furthermore, public investment faced setbacks, hindering the growth of the manufacturing sector. Despite these challenges, Vietnam’s growth rate still places it among the fastest-growing economies in the region and the world. However, concerns remain about the sustainability of this growth in the coming years.
Vietnam operates as a prominent manufacturing hub in the region, heavily dependent on trade. The decline in global demand had a negative impact on the country’s economy, reflected in its lower GDP growth rate for 2023. Export figures showed a 4.4% decrease compared to the previous year, resulting in a total value of $355.5 billion. In particular, the shipments of smartphones, the largest foreign currency earner for Vietnam, experienced an 8.3% drop. This decline in exports indicates a challenging environment for Vietnamese businesses, as they face reduced demand from international markets.
Public investment, which plays a crucial role in stimulating economic growth, faced stagnation in 2023. The intensified anti-graft campaign, referred to as the “blazing furnace,” significantly impacted the progress of public infrastructure projects. Consequently, the disbursement of public funds fell short of the target set for the year, reaching only 65% of the initial goal. The Ministry of Planning and Investment reported an estimated disbursement of 461 trillion dong ($18.98 billion) by the end of November. This setback disrupts the plans for infrastructure development and further hampers the overall growth of the economy.
Despite the challenges faced, Vietnam managed to achieve a trade surplus of $28 billion in 2023. While a trade surplus can be beneficial for a country’s currency, indicating a strong performance in exports, it also raises concerns about the overall health of the economy. A sharp fall in imports suggests a potential slowdown in manufacturing activities. Thus, the trade surplus must be examined alongside other indicators to understand the underlying dynamics of Vietnam’s economic landscape.
Recognizing the need to counterbalance the declining exports, Vietnam implemented measures to bolster domestic consumption. One such measure was the extension of a value-added tax cut. Additionally, authorities sought to expedite public investment in infrastructure projects to stimulate economic growth. Unfortunately, these initiatives faced setbacks due to the anti-graft campaign, which hindered the progress of public investment and infrastructure development.
Despite the modest growth achieved in the fourth quarter of 2023, concerns remain about the sustainability of economic growth in Vietnam. The weak global demand and decline in public investment, along with potential non-performing loans, pose significant challenges for future growth. Capital Economics suggests that the economy will continue to face struggles in 2024, with projected growth of 6.0%. To combat these challenges, the central bank may lower policy rates further, while inflation is expected to remain within the target range.
Vietnam’s economic growth in 2023 fell short of expectations, primarily due to weak global demand and stagnant public investment. The decline in exports, particularly in the smartphone sector, reflects challenges faced by Vietnamese businesses in international markets. The intensified “blazing furnace” anti-graft campaign significantly impacted the progress of public infrastructure projects, hindering the overall growth of the economy. Going forward, Vietnam will need to address these challenges and implement effective measures to stimulate economic growth and boost investor confidence.
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