OECD Forecast Vietnam’s Economic Growth at 6.6% This Year

Vietnam's economy will grow by 6.6% this year and at a similar rate in 2024, according to a report released recently by the Organisation for Economic Co-operation and Development (OECD).

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OECD Forecast Vietnam's Economic Growth at 6.6% This Year
Vietnam’s economic growth is driven by foreign investment in the manufacturing sector. Photo: VNA

In its report “The Economic Outlook for Southeast Asia, China and India 2023: Reviving tourism post-pandemic,” the OECD said Vietnam’s economic growth is driven by foreign investment in the manufacturing sector, especially electronics, machine manufacturing, textiles and footwear, and benefits from China’s loosening of Covid-19 prevention and control measures.

The organisation believed that Vietnam continues to lead the top five largest economies in Southeast Asia. The Philippines is forecast to reach growth of 5.7% in 2023 and 6.1% in 2024; Indonesia, 4.7% and 5.1%; Malaysia, 4.0% and 4.2%; and Thailand, 3.8% and 3.9% in the same period.

The end of support programmes after the Covid-19 pandemic will create favourable conditions for Vietnam to improve its public financial situation, the report said. However, weaker demand is likely to reduce investment in the Vietnamese economy. The report also recommends the country continue to closely monitor inflation trends.

The United Overseas Bank lowers Vietnam’s GDP growth forecast. (Photo: VNA)
The United Overseas Bank lowers Vietnam’s GDP growth forecast. Photo: VNA

As tourism was among the sectors most affected by both the Covid-19 pandemic and responses to it, the report highlights the economic impact of tourism in the region and explores how the sector can be reshaped to regain its significant role in Emerging Asia.

The interruption of tourism allowed countries in the region to consider reforms in the sector, including diversifying tourism markets and addressing labour market challenges, while catering to the new needs and preferences of the post-pandemic world, prioritising sustainable and environmentally responsible activities, and accelerating digitalisation.

The United Overseas Bank (UOB), however, has lowered its 2023 economic growth forecast for Vietnam from 6.6% to 6% due to a low base in the first quarter (Q1) of this year.

OECD Forecast Vietnam's Economic Growth at 6.6% This Year
The interruption of tourism allowed countries in the region to consider reforms in the sector. Photo: Nhan dan (People) newspaper

In the latest economic growth in Q1/2023 report of Vietnam, the bank said that the country’s GDP growth in the period only increased 3.32% year on year, a sharp fall from 5.92% in Q4/2022.

Based on statistics from the General Statistics Office (GSO), it attributed the fall to negative factors in production and export.

The bank’s experts said inflation in Vietnam has shown positive signs as consumer price index (CPI) in Q1/2023 rose 4.18% compared to the same period last year and lower than the 4.5% target set by the government.

Vietnam’s March CPI rose 3.35% year-on-year but declined 0.23% compared to February, indicating a slower pace in inflation.

The UOB also predicted that further loosened polices will be introduced by the State Bank of Vietnam (SBV) in the coming time.

As the US Fed is expected to end its rate hike cycle as soon as May this year and domestic inflation rates are showing some signs of reversing, the bank anticipated that the SBV will cut its refinance rate sometime in the second quarter by 100bps to 5%./.

Rosy Huong