Hanoi (VNA) – Vietnam's economy is forecast to grow 6.1% in 2024, and 6.5% in both 2025 and 2026, up from 5% last year, the World Bank (WB) has said in a new report.
According to the bank’s latest bi-annual economic report on the country Taking Stock, Vietnam’s economic growth is expected to pick up in 2024, driven by a rebound in manufactured exports and tourism, and recovering consumption and business investment.
Previously, in its forecast released in April, the WB predicted that Vietnam's economic growth would be at around 5.5% in 2024, gradually increasing to 6% in 2025.
According to the report, manufacturing output grew by 7% (y/y) in H1 2024 from a low base and drove growth in 2024 so far, accounting for a quarter of GDP growth. Services continued to account for more than half of GDP growth and climbed by 7.4% (y/y) in H1-2024. Export-oriented services (transport and warehousing) benefited from a resurgence in goods exports, as well as the recovery of the hospitality sector, with the number of foreign tourists reaching 8.8 million in June 2024, above pre-COVID levels The agriculture sector’s contribution remains stable, at 0.4%age points.
Retail sales grew 8.8% in H1, driven by goods sales on a stable trajectory since late 2022, but below a pre-pandemic average of 11.6%. Especially demand for durable and non-essential goods and services, such as vehicles, consumer appliances, holidays, and home renovations remains weak, suggesting persistent frailty in consumer confidence. Real income growth continues to be muted at 2.5% (y/y) in June 2024, on par with annual 2.7% average growth since 2022 – but below pre-pandemic trends (8.4%). Similarly, formal employment remained relatively stable with a 0.4% (y/y) improvement in April 2024.
Titled “Reaching New Heights in Capital Markets”, the report highlights the resilience of the Vietnamese economy despite rising global challenges but it also notes that the economy is not yet back to its pre-pandemic growth path.
Enhanced public investment would provide short-term stimulus while also addressing emerging infrastructure gaps – for example in energy, transport, and logistics – which are becoming a constraint on growth, it said. Bank asset quality remains a concern given rising non-performing loans (NPLs) and should be closely monitored by the authorities.
WB East Asia and Pacific Practice Manager for Macroeconomics, Trade, and Investment Sebastian Eckardt said, “During the first half of the year, Vietnam’s economy benefited from a rebound in export demand.” He noted that, “To sustain growth momentum not only for the rest of the year but over the medium-term, the authorities should deepen structural reforms, step up public investment while carefully managing emerging financial risks.”
Addressing the press conference, Dorsati Madani, Dorsati Madani Senior Economist at the WB in Vietnam, stated that the 6.1% growth forecast is very positive, but Vietnam's economy has not yet fully returned to its full potential trajectory.
Madani said that after a strong recovery in the first half of 2024, Vietnam's economic growth will slow down in the coming time, impacted by the slowing growth trends of major global economies such as the US, Europe, and China.
Regarding opportunities, the WB said if exports continue to grow and the real estate sector shows signs of recovery, domestic demand will increase in the second half of 2024 as investor and consumer confidence improves.
However, it noted that one of the main risks to economic growth is the uncertainty of global economic growth potentially being lower than expected, particularly the growth of Vietnam's big trading partners such as the US, the EU, and China.
Eckardt said these developments can impact Vietnam's exports of manufactured and processed products and negatively affect growth.
He recommended that Vietnam should accelerate the disbursement of public investment to continue to boost economic growth.
It is necessary to encourage banks to improve their capital adequacy ratios and improve infrastructure facilities to attract private investment, he stressed. Diversifying trade to further enhance integration will also be a factor to improve the resilience of the Vietnamese economy./.
