According to the International Monetary Fund, economic growth in Vietnam will rebound in the second half of the year.

DNHN - Commenting on the Vietnamese economy, the IMF and DBS noted that Vietnam is performing better than the majority of countries in the world and is therefore a desirable location for foreign manufacturing investors.

Although the growth rate has slowed due to global economic difficulties, Vietnam is performing better than most countries in the world, making it an attractive destination for foreign direct investment. The manufacturing sector attracts foreign direct investment (FDI).

This is an assessment of Vietnam's economic situation in the first half of this year by the International Monetary Fund (IMF) and DBS Bank - Singapore's leading multinational banking and financial services institution.

Unexpectedly, Vietnam's Gross Domestic Product (GDP) for the first six months of 2023 was only 3.72 percent, given the continued complexity of the global situation and the country's internal difficulties.

However, the majority of experts view this as an acceptable growth rate in the context of the global economy and are optimistic about the economic recovery of Vietnam shortly.

Following a June consultation on Vietnam's economic situation, the head of the IMF's Article 4 working group, Mr. Paulo Medas, stated that, like other nations, Vietnam faces challenges. As global growth slows and interest rates rise, the external environment is difficult and complex.

Vietnam's exports fell by 12% in the first half of the year due to a decline in global demand, which significantly impacted economic growth.

Additionally, Vietnam faces internal issues such as the slowing of the real estate and corporate bond markets, etc.

However, a gradual easing of monetary policy, such as lowering interest rates, slashing taxes, and increasing public spending, has mitigated the impact of headwinds.

The IMF believes that Vietnam's economic growth will rebound in the second half of 2023, reaching approximately 4.7% for the entire year, as a result of the recovery of exports and the relaxation of domestic policies. It is anticipated that inflation will be contained below the SBV's target of 4.5%.

Once structural reforms are implemented, Vietnam could return to high growth over the medium term.

According to expert Paulo Medas, short-term risks to Vietnam's economic expansion remain significant. Therefore, the focus of current policy should be on ensuring macroeconomic and financial stability while accelerating reforms.

Fiscal policy can play a greater role in promoting economic growth and assisting the poorest and most vulnerable members of society.

The IMF also recommended that Vietnam take drastic measures to restructure the real estate market and promote the healthy development of the corporate bond market; improve the business climate, upgrade critical infrastructure, and invest in education; and promote the healthy development of the corporate bond market.

With the total amount of newly registered FDI capital in the first half of 2023 increasing by roughly 30 percent compared to the same period the previous year, DBS believes that despite facing numerous challenges, Vietnam remains an attractive destination for FDI due to the changing trend. Manufacturing, multiple free trade agreements (FTAs), 6-7% growth prospects in the medium term, and a growing e-ecosystem.

New FDI inflows into the manufacturing sector must increase dramatically in 2023, demonstrating that foreign investors continue to have faith in Vietnam's long-term potential.

As the global electronics industry cycle recovers, DBS believes that Vietnam's exports may increase slightly in the second half of 2023.

The domestic services and tourism sectors of Vietnam are likely to continue to support economic growth.

Additionally, Marco Forster, Head of ASEAN Consulting at Dezan Shira & Associates, remarked that economies are always cyclical and slow growth periods are inevitable.

Vietnam is anticipated to experience rapid economic growth in the medium term despite its current difficulties, owing to its emerging position as a leading manufacturing hub in Southeast Asia, its highly educated population, and its increasing investment capital.

Similarly, the rating agency S&P Global Ratings believes that a young, increasingly highly educated, and highly competitive workforce is the primary draw for foreign investors. Meanwhile, Vietnam's economy is expected to recover over the next 24 months as global demand increases and the country gradually addresses domestic challenges.

The Organisation for Economic Cooperation and Development (OECD) predicts in its "OECD Economic Report: Vietnam 2023" that Vietnam's economy will grow steadily, at 6.5% in 2023 and 6.6% in 2024.

According to Dr. Koen Vincent of the OECD's Economic Department, Vietnam's economy is vulnerable to the effects of geopolitical uncertainty and the risk of supply chain disruptions due to its openness.

In addition, short-term external conditions threaten economic recovery. Global trade could continue to be hampered by supply chain disruptions, and rising inflation could exert additional downward pressure on Vietnam's currency.

Therefore, short-term macroeconomic policy should prioritize mitigating the impact of high energy prices through targeted support for vulnerable households to strengthen the economy's resilience.

Over the medium term, the report emphasizes the need to bolster macroeconomic policy frameworks by enhancing fiscal sustainability through the expansion of the tax base, strengthening of the social protection system, and contraction of the informal economy.

In addition, Vietnam must continue to enhance its business environment and facilitate its digital transformation to sustain high economic growth following its recovery.

According to the Google Destination Insights report, Vietnam was the seventh most-searched destination in the tourism industry between March and June, and the only Southeast Asian country to crack the top 20.

Gary Bowerman, a tourism analyst based in Kuala Lumpur (Malaysia), predicts that changes in visa regulations will contribute to the expansion of Vietnam's tourism industry over the next six months. Especially when the Chinese market recovers, the number of visitors to Vietnam will increase dramatically. However, the number of international tourists to Vietnam has not yet returned to pre-COVID-19 levels.

According to the OECD, Vietnam's greatest challenge is to improve the quality of its infrastructure, better connect tourism service providers, expand local participation, and better regulate mass tourism in natural areas.

According to the OECD, Vietnam must also better exploit domestic tourism and rapidly diversify the sources of visitors from abroad, concentrating on the markets of ASEAN countries and India, which Vietnam currently exploits with fewer resources than other nations. Neighboring nations including Laos, Cambodia, and Malaysia.

With a competitive workforce and substantial investment capital, experts believe Vietnam still has room to implement growth-boosting measures, and the outlook for economic recovery in the final months of the year is optimistic.

PV (Synthesis)