Mr Nguyen Minh Cuong, ADB's Chief Economist in Vietnam, believes that Vietnam will continue to recover in the coming months
- 201
- Business
- 22:39 26/09/2022
DNHN - Mr Nguyen Minh Cuong stated in the most recent analysis of Vietnam's economic development that the country's strong fiscal position and low public debt have significantly supported Vietnam's strong economic recovery, despite global inflation and rising interest rates.
![Mr Nguyen Minh Cuong, ADB's Chief Economist in Vietnam Mr Nguyen Minh Cuong, ADB's Chief Economist in Vietnam](https://media.doanhnghiephoinhap.vn/uploads/2022/09/26/1-1664206662.jpg)
Food shortages and the recovery of the global food supply chain, according to Mr Nguyen Minh Cuong, will enhance agricultural production this year.
However, the agricultural growth prediction has been reduced from 3.5% to 3%, since high input costs may limit the industry's expansion.
The manufacturing industry's growth rate is slowed by a drop in global demand. The Purchasing Managers' Index decreased to 52.7 in August from 54.0 in June. As a result, the prediction for industrial growth has been reduced from 9.5% to 8.5%, although the prognosis remains positive. The industrial sector continues to grow as a result of significant FDI inflows.
The restoration of regular internal travel and the easing of travel limitations imposed by the Covid-19 pandemic for international tourists would aid tourism rebound in the last months of the year. This supports service sector growth, which has been upgraded from 5.5% to 6.6% by 2022. However, this prediction is still lower than the 7.3% rise in services expected in 2019 - before the epidemic.
Exports are slowing because demand in the global market is lower. The depreciation of the dong makes imports more expensive than exports, resulting in a trade imbalance in 2022.
High global inflation, albeit reducing, and tightening financial conditions will continue to decrease remittances.
Due to these factors, the ADB predicts a current account deficit of 1.5% of GDP this year, and a deficit of 1.7% of GDP in 2023, as global growth expectations weaken.
According to Mr Cuong, the total investment is likely to rise this year. Although global geopolitical uncertainties and tighter financial circumstances will continue to constrain FDI inflows in 2022, FDI disbursement will rise substantially as international investors continue to trust and do business in Vietnam becomes more convenient.
The government's aggressive effort to disperse public investment, particularly the execution of the Economic Development and Recovery Program, will counteract the reduction in exports caused by sluggish global demand.
By keeping policy interest rates steady, the SBV maintains a flexible and cautious monetary policy. The State Bank will also increase the execution of the interest rate support program to lend to the economy at a cheap cost.
Mr Cuong further mentioned that expansionary monetary policy, such as interest rate support, debt restructuring, and debt extension by rules but without changing debt groups, might cause the categorization of challenging loans to be delayed. Claims are expected to account for 5% of total outstanding loans in 2022.
Attempts to maintain the currency rate steady to encourage imports and exports, he noted, might put pressure on foreign exchange reserves.
According to the ADB, the budget deficit would rise to 4% of GDP this year as a result of the ongoing implementation of price controls, tax cuts, targeted budget support, and social security spending, health and immunization. Covid-19.
However, because the state debt is under control, Vietnam still has budgetary headroom. The public debt is expected to be 43.1% of GDP in 2021, less than the required threshold of 60%. Meanwhile, Vietnam's external debt is expected to be 38.4% of GDP, well under the 45.0% statutory maximum. "In the face of global inflation and rising interest rates, Vietnam's successful economic recovery has been considerably helped by its excellent fiscal position and low public debt," Mr Cuong added.
Vietnam's careful monetary policy and successful execution of price control measures for gasoline, power, food, healthcare, and education will help to keep inflation at 3.8% in 2022 and 4.0% in 2023.
Rising investment, controlled inflation, and expansionary monetary and fiscal circumstances are likely to stimulate domestic demand in 2022, therefore fuelling the continued economic recovery.
Consumption increases throughout the remainder of 2022, and the possibility of higher pricing for some government-managed items may exacerbate inflationary pressures.
However, Mr Cuong cautioned that, while the business climate improved in the first eight months of the year, economic momentum began to slow in August, and the number of newly registered enterprises declined somewhat, albeit the total number of new businesses continues to rise. This drop reflects difficulties in the business recovery, such as labour shortages and lower new orders.
Lam Nghi
Related news
- Businesses need to increase adaptability to join the global supply chain
- Agricultural exports are forecast to reach nearly 60 billion USD in 2024
- General Secretary Nguyen Phu Trong: An outstanding politician, a great theorist
- Why is bank security very important?
- Export businesses face difficulties as sea freight rates rise
- Banks and challenges in funding green projects
- Strategies for innovation to adapt and seize opportunities by enterprises
- The Ho Chi Minh City Friendship Dialogue and the Ho Chi Minh City Economic Forum will take place in September 2024
- Why is it necessary to implement the direct electricity purchase mechanism soon?
- How are bank bond interest rates attractive to investors?
- Bamboo Airways aims to break even and become profitable by 2025
- Overcoming rising input costs and supply challenges in business
- The strong growth of air travel demand in Vietnam
- New proposal on petroleum business: Enterprises can have the freedom to set retail prices
- Electric vehicle market share in Vietnam: Development trends and challenges
- Farm School - What legal framework is needed for this new model?
- Digital transformation in the banking sector: The future direction of financial services
- EuroCham: European enterprises confident in Vietnam's long-term economic growth
- The journey from Nghe An fields to the TH True Milk brand
- Why support taxi businesses transitioning to electric vehicles?
Đọc thêm Business
Testing the "sandbox" model to diversify the Vietnamese stock market
The "sandbox" model to test new securities products will help select a number of securities companies and intermediary financial institutions with sufficient potential to pilot some structured products for the market.
Agricultural exports are forecast to reach nearly 60 billion USD in 2024
Vietnam's agricultural sector is a bright spot with increasing export potential. It is forecast that in 2024, Vietnam could reach an export level of nearly 60 billion USD, opening up great opportunities for sustainable development in this sector.
General Secretary Nguyen Phu Trong: An outstanding politician, a great theorist
General Secretary Nguyen Phu Trong's passing is a great loss for our Party and the people of Vietnam, leaving infinite regret among the people of the entire country and internationally.
Export businesses face difficulties as sea freight rates rise
Logistics costs have now increased by about 130% compared to the end of 2023. This reality has been pushing domestic export businesses into a state of freezing many export orders.
The Ho Chi Minh City Friendship Dialogue and the Ho Chi Minh City Economic Forum will take place in September 2024
The 2nd Ho Chi Minh City Friendship Dialogue (Ho Chi Minh City Friendship Dialogue – FD) in 2024, themed "Industrial transformation: Experiences and priorities in development cooperation", will take place from September 23-24, 2024.
Why is it necessary to implement the direct electricity purchase mechanism soon?
Implementing the direct electricity purchase mechanism brings many economic and environmental benefits and creates condition for the sustainable development of the electricity sector. Thus, this mechanism has become increasingly necessary and urgent.
How are bank bond interest rates attractive to investors?
Bank bonds are attracting investor interest due to their attractive interest rates and high level of security. This is a popular choice among investors in stable and safe financial products today.
Overcoming rising input costs and supply challenges in business
Currently, businesses are facing significant challenges as input costs rise and supply becomes difficult. The shortage of supply can impact business operations, profits, and the competitiveness of businesses.
The strong growth of air travel demand in Vietnam
Vietnam is becoming a top tourist destination in Southeast Asia, with the strong growth in air travel demand creating both opportunities and challenges for the industry.
Tourism and resort real estate begins to show more positive signals
Tourism and resort real estate, although affected by the pandemic, are showing many signs of recovery and many new positive opportunities in the coming period.