Global Headwinds Hinder Vietnam Hitting 2023 Growth Target

Nguyen Dieu Tu Uyen
·2 min read
3

(Bloomberg) -- Vietnam, facing continued global economic headwinds, will struggle to hit the year’s growth target of 6.5%, National Assembly Chairman Vuong Dinh Hue told a Hanoi economic forum.

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“It will be very hard for Vietnam to meet its GDP growth target this year,” he said. The export-reliant country has been unable to gain economic momentum as global demand for products manufactured in Vietnam has waned and major markets such as China, the US, South Korea and Japan are enduring slowdowns, Hue said.

Vietnam’s exports dropped for a sixth straight month in August, the longest slump in 14 years. The country’s gross domestic product grew 3.72% in the first half, the slowest pace of expansion over that time period in at least a decade, excluding the pandemic years of 2020 and 2021.

The State Bank of Vietnam will continue to pursue its monetary policy easing to the bolster the economy but has limited room for more policy rate cuts, central bank Deputy Governor Dao Minh Tu said at the forum. The regulator has reduced rates four times this year and further rate cuts risk weakening the dong, he added.

The state bank needs to “manage policies in a prudent, cautious and appropriate manner,” Tu said.

Vietnam’s slow rollout of government-funded infrastructure projects is contributing to the nation’s sluggish economy, Hue said. Just 42.4% of planned public investment disbursements had been released between January and August, he added. The slow disbursement of public funds is mostly due to regulatory issues tied to land clearance and compensation and resettlement of residents living at the project sites, he said.

A slowdown in construction is also a drag on the economy, the parliament chairman said.

Vietnam has enjoyed a trade surplus only because its manufacturers are importing less material due to a lack of demand for production, Hue said. Domestic companies are having a tough time maintaining resilience in the face of plunging orders and limited capital, he said.

Vietnamese manufacturers are also losing orders to competitors because they have not embraced green production methods, he said. In the apparel industry, for instance, Vietnam “may even lose out to Bangladesh, which is restructuring its textile industry to go green and we haven’t been able to do so.”

(Updates the story with limited room for rate cuts in the fourth paragraph.)

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