Containers at Gemalink International Port in Ba Ria-Vung Tau Province. (Photo: VNA)
The industrial production index (IIP) registered a meagre 0.1%year-on-year increase in May, down from 0.5% in April. In contrast, retailsales remained robust, expanding by 11.5% year-on-year, mirroring the growthrate seen in April.
While sales of goods improving from 9.7% year-on-year in April to10.9% in May, sales of services experienced a significant decline, droppingfrom 19.2% year-on-year in April to 7.6% in May, reflecting the impact ofprevailing uncertainties on consumer spending.
In terms of trade, exports of goods faced a significant setback,declining by 6% compared to the previous year, primarily due to weak externaldemand. Simultaneously, imports fell by 18.4% year-on-year in May, reflectingthe prolonged slowdown in demand for foreign inputs necessary for productionand exports.
“If global financial conditions tighten more, external demand mayweaken further,” the report said.
Amidst these economic challenges, the consumer price index (CPI)inflation showed a decline for the fourth consecutive month. In May, the CPIsoftened from 2.8% year-on-year in April to 2.4% year-on-year in May, driven byfalling global energy prices and a decrease in domestic transport costs.However, core inflation remained elevated at 4.5% year-on-year in May,marginally lower than April's rate of 4.6% year-on-year.
Foreign direct investment (FDI) commitments also slowed down lastmonth due to prevailing global uncertainties, weighing on investor confidence.However, FDI disbursement remained stable at 1.8 billion USD, comparable to thesame period the previous year.
To stimulate the economy, the State Bank of Vietnam (SBV) tookmeasures to ease monetary policies. The refinancing interest rate was loweredfrom 5.5% to 5%, and the overnight lending facility rate was reduced from 6% to5.5%. This marks the third consecutive rate cut since March 2023.
“However, authorities must remain vigilant to potential pressureson capital flows and the exchange rate resulting from diverging monetarypolicies between Vietnam and other countries,” World Bank’s analysts suggested.
Credit growth continued to decelerate, dropping from 9.2% year-on-yearin April 2023 to 9% year-on-year in May, reflecting weakening demand.
Moreover, the monthly budget balance recorded a substantialdeficit of approximately 2 billion USD in May. This deficit can be attributedto a decrease in revenue collection by 35.8% year-on-year, primarily due toone-off effects from high post-COVID revenue in 2022 related to land sales,property transactions, and value-added tax collections. On the other hand,public expenditure increased by 27.8% year-on-year in May.
The challenges faced by the Vietnamese economy necessitatedcareful monitoring and proactive measures, the report said, adding potentialenergy shortages in the Northern region, which began in late May, would requireurgent attention to avoid further impact on the economy.
Furthermore, it said accelerating public investment disbursement,particularly for National Target Programmes, would bolster aggregate demand andfoster short-term economic growth. Additionally, prioritising investments indigital and green technologies, infrastructure development and human capitalwould promote sustainable long-term development.
As manufacturing exports had slowed and employment inmanufacturing had been affected, it would be important to quickly identify andsupport impacted workers and families through the social protection system.Streamlining administrative procedures and removing regulatory hurdles wouldhelp promote business activities and investments needed for economic growth, itadded./.
VNA
