Vietnam GDP growth to expand by 6% in 2024: IMF

The International Monetary Fund (IMF) forecasts that Vietnam's economy will grow by around 6%  this year, aligning with the Government’s GDP target set for this year, driven by strong demand, foreign direct investment, and supportive policies.

Head of IMF's Vietnam team Paulo Medas during a meeting with the Ministry of Finance. Source: MoF

After a regular consultation, Paulo Medas, head of the IMF's Vietnam team, noted that despite a challenging 2023, Vietnam's economy grew by 5% due to the government's decisive policies.

The economy has been significantly affected by disruptions in the real estate market, financial stress, and a sharp decline in exports, he noted.

The IMF expert believed that from late 2023, the economy began to recover thanks to improved export and tourism activities, alongside supportive fiscal and monetary policies.

"Economic growth is expected to rebound to nearly 6% in 2024, supported by continued strong external demand, stable foreign direct investment, and accommodative policies," stated Medas.

However, the IMF warns of significant risks. Exports, a major driver of Vietnam's economy, could be weaker if global growth falls short of expectations, geopolitical tensions persist, or trade disputes escalate.

Additionally, domestic demand growth is expected to remain weak due to high corporate indebtedness, while the real estate market is likely to recover only in the medium term.

Prolonged weaknesses in the real estate and the corporate bond markets could affect banks' ability to lend more than anticipated, harming economic growth and weakening financial stability.

Electronics production at Rhythm Precision Vietnam at Noi Bai Industrial Park, Soc Son District. Photo: The Hanoi Times

The IMF projects inflation to hover around the State Bank of Vietnam (SBV)'s target of 4-4.5% this year. Early-year inflation rose partly due to food prices, although core inflation remained relatively low and stable. Prolonged exchange rate pressures under loose monetary conditions could lead to greater inflationary impacts.

While inflation is under control, Medas emphasized that the SBV should be ready to tighten monetary policy if inflationary pressures rise. Policies should continue to focus on strengthening financial stability, which requires improving asset quality and avoiding excessive low-quality credit growth.

Over time, increasing exchange rate flexibility and further modernizing monetary policy towards inflation targeting will help better manage external shocks and protect foreign exchange reserves, Medas noted.

Fiscal policy continues to support economic growth in 2024 amid expected significant public sector wage increases and ongoing efforts to boost public investment. Strengthening fiscal management will help address future challenges. This includes improving the composition and quality of public spending and services, reinforcing budget planning to better reflect the impacts of population aging and climate change in the medium and long term, and enhancing the social safety net. Mobilizing tax revenue will provide resources for increased social spending, addressing climate change, and meeting large infrastructure investment needs, he added.

Additionally, the expert also recognized significant regulatory progress this year. For the banking system, alongside the new Law on Credit Institutions, further measures are needed to enhance the supervision and governance of financial institutions. The revision of the Land Law and other related real estate laws aims to address legal bottlenecks in this sector, but additional efforts are needed to restructure weak real estate developers and promote a healthy corporate bond market.