Vietnam’s economic growth slowed to 5.05% this year from last year’s 8.02%, official data showed on Friday, weighed down by weak global demand while public investment stalled amid a stepped-up crackdown on graft.
According to data released by the government’s General Statistics Office (GSO), this year’s gross domestic product (GDP) growth was lower than the government’s target of 6.5% and lower than the average growth of 5.87% over the previous decade.
Vietnam is a regional manufacturing center that depends heavily on trade. Exports in 2023 fell 4.4% from last year to $355.5 billion, with shipments of smartphones, its biggest foreign currency earner, down 8.3%, GSO said in its report.
Its index of industrial production in 2023 rose 1.5% from last year, while average consumer prices rose 3.25% in the year, according to the GSO. Retail sales increased by 9.6%.
“Although this year’s growth is below the government’s target of 6.5%, it is still a positive result, placing Vietnam among the fastest-growing economies in the region and the world,” GSO said.
Imports fell 8.9% to $327.5 billion in 2023, resulting in a trade surplus of $28 billion for the year, according to the report. A large trade surplus is supporting the dong, but a sharp drop in imports could indicate a slowdown in manufacturing activity in the coming months.
The country’s central bank has cut its key interest rates four times this year in a bid to boost economic growth, cutting the refinancing rate and the discount rate by a cumulative 150 basis points, but credit growth remains much weaker than its 14% target.
Total credit growth in the economy was 8.2% at the end of November according to data from the State Bank of Vietnam, the country’s central bank, which said: “The economy still faces difficulties with a slow economic recovery, and therefore credit demand has been weak”.
To offset the decline in exports, Vietnam decided to extend value-added tax cuts to boost domestic consumption, while authorities sought to accelerate public investment, particularly in infrastructure.
But public investment has ground to a halt this year as a result of the intensification of the “red-hot furnace” anti-corruption campaign, which has often paralyzed activity.
Disbursement of public funds in the year to the end of November was estimated at 461 trillion dong ($18.98 billion), just 65% of the target set for the year, according to the Ministry of Planning and Investment.
According to the GSO, GDP grew 6.72% year-on-year in the fourth quarter of this year, faster than the 5.47% expansion in the third quarter and the 5.92% growth in the same period last year. GDP growth in the third quarter was revised upwards from 5.33%.
But Capital Economics said the momentum was unlikely to last in the fourth quarter if exports weakened and commercial banks cut back on lending in response to a surge in non-performing loans.
“We think the economy will struggle in 2024,” it said in a note, forecasting growth at 6.0% next year.
The central bank is likely to cut rates further next year, with inflation likely to remain within target, Capital Economics said, although it added that the consensus expected no change.
In November, Vietnam’s legislature approved the government’s next year GDP growth targets of 6.0% to 6.5% and inflation in the range of 4.0% to 4.5%.
