Hanoi (VNA) - Amidst a volatile global economy, geopolitical instability, and persistent inflation, Vietnam stands out as a unique story, a dynamic recovery that comes with inherent risk. Economic expansion in Q4 will unfurl in one of the two scenarios, growing at a less optimistic rate of 6.4% or the more positive clip of 7% growth.
This assessment was presented in the Q3 Economic Report released by the Vietnam Institute for Economic and Policy Research (VEPR) on October 15. Notably, the report highlighted the strengths and weaknesses of the economy, focusing on growth and its ability to attract foreign direct investment (FDI).
VEPR Deputy Director Nguyen Quoc Viet held that it reflected a strong resilience in the economy in the first nine months of 2024, surpassing initial expectations. However, he cautioned that Vietnam should not become complacent in the face of complex global economic fluctuations and internal economic challenges.
According to the report, against this backdrop, the ASEAN Plus Three region has exhibited steady growth, driven by a strong recovery in tourism and exports to major markets. Vietnam, in particular, has charted its own dynamic recovery path. Its GDP in the first three quarters this year reached 6.82%, 1.5 times higher than the 4.4% recorded during the same period last year, with top contributions from the industrial and service sectors.
In terms of aggregate demand, the upturn in trade and foreign direct investment (FDI) has become the main driving force for the economy. Notably, the value of goods trade far exceeded expectations, with a total turnover of 578.5 billion USD, a sharp increase of 16.3% over the same period, and a surplus of 20.8 billion USD. This is an outstanding achievement during the 2020-2024 period, Viet said.
Another positive development was that State budget revenue exceeded the plan, while public spending decreased compared to the same period in 2023. This opens up opportunities to continue implementing support policies, such as tax exemptions and reductions, especially in the context of many industries being affected by Typhoon Yagi.
Two scenarios, various concerns
While Vietnam is on track for a strong recovery, many risks still exist, the VEPR report said, elaborating that its economy remains heavily dependent on export, making growth vulnerable to fluctuations in the global economy.
The budget revenue structure still depends on revenue from land and foreign trade which are untenable sources. Furthermore, domestic public debt is rising, and the credit-to-GDP ratio remains high, posing risks to the financial system. Viet suggested stronger reforms to diversify revenue sources, enhance the transparency and sustainability of the budget, and take effective risk management measures to ensure the stability of the financial system.
While the business environment has seen considerable improvement, there are still many obstacles, including complex administrative procedures, which create challenges for businesses. That is why the report suggested continuing strong reforms to create a more favourable business environment and attract private investment.
The report also dedicates a section to analysing FDI flows, a key contributor to Vietnam’s economic growth. Despite a downward trend in global FDI flows, Vietnam has retained its appeal to foreign investors. Growth in FDI, particularly in the manufacturing and processing sectors, is a positive sign, demonstrating investor confidence in the country’s economy. However, the report underlined the need for more effective FDI policies, focusing on quality over quantity, specifically prioritising high-tech projects that can boost the economy's competitiveness.
Based on the analyses of domestic and global economic conditions, VEPR presented two scenarios for Vietnam’s economic growth in Q4 and the entire year of 2024. It expects the economy to expand by 7% this year, while the less optimistic scenario projects a 6.84% growth rate.
“In either scenario, Vietnam must strive to overcome challenges, maintain growth momentum, and ensure sustainable economic development,” Viet said.
The report also noted that while there are areas that need attention, the recovery process continues, bringing hope for a brighter future. To obtain the set target, it underscored the need for persistent efforts from the entire political system, as well as the collaboration of the business community and all citizens./.
