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Viet Nam’s 2024 GDP growth target easily obtainable: UNDP economist

VGP - Viet Nam setting 2024 GDP growth target at over 6 percent is easily obtainable, said UNDP Senior International Economist Jonathan Pincus.

January 02, 2024 9:58 AM GMT+7
Viet Nam’s 2024 GDP growth target easily obtainable: UNDP economist- Ảnh 1.

UNDP Senior International Economist Jonathan Pincus - Photo: VGP

In a recent interview with the VGP, Jonathan Pincus noted that exports remain the key economic growth driver of Viet Nam in 2024, expecting that the nation's exports will be improved.

Furthermore, foreign direct investment (FDI) is still quite strong and a lot of foreign investors are interested in the manufacturing in Viet Nam, particularly in terms of high-tech industries, semiconductors, and computer equipment. That is all very positive, he noted.

"As those investments come on stream, I think we can expect Viet Nam's exports to remain quite strong and that would clearly drive growth to at least 6 percent next year", emphasized the economist.

Regarding global economic prospects in 2024, the UNDP official held that the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) forecasted that the global growth will actually slowdown in 2024 due to the lack of confidence in the rich countries.

Besides, inflation is expected to come down from 7.5 percent in 2023 to 5.5 percent in OECD countries in 2024, but that is still quite high which means that the U.S. Federal Reserve System (FED) and so forth the European Central Bank (ECB) will not be eager to reduce interest rates very quickly.

If prices fall or at least stop rising, then perhaps some of the central banks will be able to reduce interest rates and that would stimulate economic growth.

Meanwhile, the risks for next year are largely geopolitical. There are conflicts in the Middle East and in the Ukraine. There is a presidential election next year in the U.S., which is a cause for uncertainty in the markets. There are risks on the downside, but, on the whole, it is sort of a mixed picture for next year, shared Jonathan Pincus.

In the positive side, most forecasters predict global trade to rebound more quickly in 2024. The world economy's growth is forecasted to attain 2.5-3 percent next year which would be very good for Viet Nam, he added.

Maintaining stable exchange rates and prices: Big success for Government in 2023

According to the UNDP official, Viet Nam did quite well in 2023. First of all, prices remained reasonably stable within target for most of the year, which was a big achievement because a lot of countries did face very rapidly rising prices and inflation, which is destabilizing.

In addition, the government managed to increase public investment by 20-25 percent in 2023, which help support domestic demand and also build the infrastructure that Viet Nam needs to recover even more strongly next year and in 2025.

The nation successfully kept the exchange rate quite stable. There had a bit of a wobble in the dollar exchange rate in 2022, but the exchange rate stayed very stable in 2023 largely because trade surpluses were positive for most of the year.

The FDI inflows were still strong at about US$36.6 billion, which is a good performance, said the economist, adding these achievements were a big success for the government.

In terms of obstacles and difficulties that made Viet Nam fail to achieve its 6.5 percent GDP growth rate target set earlier this year, Jonathan Pincus said, Viet Nam is an export-led economy.

Exports are equivalent to 94 percent of GDP, which is even higher than Malaysia (75 percent) and Thailand (65 percent). So even among the Southeast Asian countries, Viet Nam is very heavily dependent on exports.

World trade grew in 2023, but less than 1 percent which is quite slow, and that is the main reason why Viet Nam was not able to reach its growth target this year.

It was largely because of higher interest rates in Europe and North America, the slowing growth in those countries, and lack of consumer confidence in those countries, which meant that purchases of goods from Viet Nam were less than expected.

The other reason, of course, is that Viet Nam and China are very close neighbors and the economies are very closely related to one another. Yet, the recovery in China was a bit disappointing this year. China had a lot of domestic obstacles such as problems in the supply chains and the property sector.

Those two reasons were the main reasons that that Viet Nam didn't achieve its growth target. However, Viet Nam's economic growth in 2023 is quite good given the condition of the global economy.

UNDP Senior International Economist Jonathan Pincus talks about the Vietnamese Government's efforts to overcome economic headwinds in 2023

Promoting real estate market recovery-crucial priority in 2024

The UNDP official noted that the main domestic challenges for Viet Nam in 2024 are problems related to property market and financial sector.

Finding ways to help the property development sector growth would be very important as a number of industries rely on properties, including cement industry, steel industry, and furniture, he stated.

Looking at the property market in Viet Nam, as in China, there were property companies that experience financial distress largely because demand for properties basically evaporated in 2023. There was very little demand for new houses and for properties. That is a result of the COVID-19 pandemic.

During the pandemic, a lot of companies and households borrowed money. As the pandemic came to close, a lot of that money had to be paid back so people were not financially in a position to buy property. The banks were not in a position to lend money to the proper households and businesses to buy properties.

As a result, there was very limited demand so that the property developing companies were unable to really service their debt. They had too much property on their books that they could not sell. They had too much debt and the combination of not enough revenue and too much debt meant that some of them faced some financial distress. They need to sell assets to pay down debt and that had a wider impact on the economy.

Viet Nam needs to recover the property sector. That will happen partly on its own as interest rates come down and there's more liquidity in the financial sector, he suggested.

The government can also help stimulate demand in the property sector by doing things that other countries have done quite effectively to stimulate the mortgage market, and guarantee mortgage lending for the commercial banks to help a larger number of households buy properties, the economist recommended.

Meanwhile, Viet Nam should develop sub-urban areas around the cities to help the property developers offer affordable houses in those areas, he added.

Mr. Jonathan Pincus said that promoting real estate market recovery should be a crucial priority for the Government in the coming year, whether it is via measures to boost public investment, upgrade infrastructure or intervene the financial market./.