GDP growth in the first quarter of 2024 stood at 5.66 per cent. What is your assessment of this result? Does it match the scenario set by Government Resolution No. 01 /NQ-CP, issued on January 5, 2024?

The GDP growth of 5.66 per cent in the first quarter was the highest in the opening quarter since 2020. Though not as high as in 2018 and 2019, the result still reflected the major effort and determination of the government, localities, businesses, and people on Vietnam’s path towards economic recovery and development.

The economic growth scenarios set out in Resolution No. 01 target growth of 6-6.5 per cent for 2024 and 5.2-5.6 per cent in the first quarter. So growth in the first quarter was higher than the target. But there were differences in specific sectors compared to the scenarios.

The industry and construction sector posted the highest growth, of 6.28 per cent year-on-year, which was much higher than the targeted 5.5 per cent. The agriculture, forestry, and fisheries sector and the services sector, meanwhile, posted growth of 2.98 per cent and 6.12 per cent, respectively, which were lower than the targets of 3 per cent and 6.3-6.5 per cent.

However, overall growth of 5.66 per cent is a positive start to 2024 for Vietnam’s economy given the economic, political, and social changes being seen around the world, in the region, and in Vietnam.

What drivers contributed to growth in the first quarter? What factors impressed you the most?

In the context of prolonged risks and uncertainties, with global economic growth being forecast to slow to around 2.4 per cent after poor performance in 2023, Vietnam’s economic growth in the first quarter is certainly positive at an estimated 5.66 per cent, and marks the best result in the opening quarter of a year since 2020.

The result can be attributed to five main factors.

Firstly, the macro-economy remains stable, with inflation controlled and economic indicators balanced, supporting investment, production, trade, and consumption. Secondly, agricultural restructuring, as a key pillar, has strengthened the economy. Thirdly, increased public investment and FDI attraction contribute to mid and long-term economic growth. Fourthly, rising consumption demand drives retail sales and robust tourism growth, stimulating various sectors like accommodation, catering, and transport. And finally, government policies, including a 2 per cent VAT cut and other measures like reduced interest rates and extended debt repayment deadlines, bolster consumption and support social welfare.

Among these factors, I have a more positive outlook of the impact on the demand side, with increased exports and imports of goods and services; tourism being a bright spot; foreign and State investment boosting private investment; and household demand rising again from consumption promotion policies such as the VAT reduction and lower interest rates.

Additionally, the manufacturing and processing sector shows signs of continued recovery, signaling better economic times for Vietnam.

Credit had risen 0.26 per cent since the end of 2023 as of March 25. What are your thoughts on the health of Vietnam’s businesses? What do the number of newly-established enterprises and the number of those being dissolved actually reflect?

It is necessary to consider different matters to fully understand business registrations and dissolutions in the first quarter.

The world has undergone rapid, complex, and unexpected changes, creating a host of difficulties and challenges in economic growth and also the production and trade of businesses.

Vietnam’s economy is in a transition period and still of modest scale, marked by limited competiveness and resilience but with a high degree of openness, with 95 per cent of enterprises being of small and micro size, so global changes have significant and direct impacts on their production and trade. The economy overall still faces its share of problems.

The business sector contributed 66 per cent to Vietnam’s GDP growth of 5.66 per cent in the first quarter. The Manufacturing Purchasing Managers’ Index™ (PMI®) in the first two months was above the 50.0 no-change mark before slipping under in March. So the economy as well as production and trade continue to exhibit positive signs.

In the first quarter, 59,848 new enterprises were registered or resumed operations; fewer than the 73,978 that temporarily suspended or ceased operations. This trend isn’t uncommon, as businesses often align their plans with their actual conditions and financial situation. Many choose to start or resume operations after the Tet (Lunar New Year) holiday, typically in the first quarter.

There are some points I’d like to make about business registrations in the opening quarter.

Firstly, a record-breaking 36,244 enterprises were established, indicating continued confidence in Vietnam’s economy. Secondly, business registrations are on the rise. March saw a surge in new enterprises and existing businesses resuming operations, totaling 17,136 and surpassing the 10,531 temporarily suspending or ceasing operations. Thirdly, of the nearly 74,000 enterprises ceasing operations, 72.1 per cent did so temporarily, with almost 90 per cent being small-scale businesses with capital under VND10 billion ($400,000) and operating for less than five years, mostly in the services sector. Fourthly, the number of new businesses and resumptions was overshadowed by those exiting the market, with a significant increase compared to the first quarter of 2023. The difference in 2023 was 3,000 enterprises, while the figure this year was 14,000. And finally, the average registered capital per business decreased from over VND10 billion ($400,000) in 2017-2022 to VND9.2 billion ($368,000) in 2023-2024.

Public investment is expected to help boost growth in 2024. To what degree was public investment a growth driver in the first quarter? What are your expectations for the months to come?

The government and the Prime Minister have resolutely called for the allocation and disbursement of public investment capital since the beginning of the year. Disbursement in the first quarter reached 13.9 per cent of the annual plan; the highest first-quarter result since 2019, when it was 13.3 per cent. In 2020 it slipped to 11.8 per cent, then in 2021 was 13.7 per cent, in 2022 was 12.9 per cent, and in 2023 was also 12.9 per cent. This demonstrates the resolute direction from the government and the Prime Minister as well as the efforts of relevant ministries, sectors, and localities to speed up the disbursement of public investment capital since early in the year.

Disbursement is typically at its lowest in the first quarter of the year, as ministries, sectors, and localities allocate capital and complete investment procedures. The Tet holiday also impacts disbursement, leading to a gradual increase throughout the remainder of the year. Effective project implementation could help meet the public capital disbursement target for 2024.

I believe that disbursement over the quarters to come will be sped up, accompanied by both quality and efficiency. Disbursement for the year as a whole is estimated at 95 per cent of the annual target assigned by the Prime Minister, in conformity with the direction of the government set out in Resolution No. 01 on key tasks and resolutions to implement the socio-economic development plan and State budget estimates in 2024. It will be a key factor contributing to economic growth in 2024.

With recent global changes and differing circumstances in the domestic economy, what are your forecasts for the economy in the months to come?

With resolute direction from the Prime Minister and the government, relevant ministries and localities have focused on building action plans to implement solutions to meet the growth target. GDP growth in the first quarter was 5.66 per cent, which creates a good foundation for the economy throughout the year.

Many of the economic support and stimulus packages introduced after Covid-19 have gradually seeped into the economy, directly affecting aggregate demand. Increased public investment over the past few years has not only provided a foundation for economic development but also contributed to stimulating private investment. In particular, the growing influx of foreign investment will provide strength for future economic growth.

Exports have seen positive growth, with a trade surplus of $8.08 billion posted in the first quarter, signaling a recovery in domestic production. Domestic consumption has also been boosted, with a number of promotional initiatives introduced, such as discounts and VAT reductions. These are bright spots that will help accelerate growth during 2024.

The global economy faces challenges due to increased competition between major economies, geopolitical tensions, conflicts in regions like Ukraine and Gaza, and shipping disruptions in the Red Sea, impacting global supply chains and maritime safety. Vietnam’s open economy is vulnerable to these global factors. Key concerns include: 1) the slow recovery of major economies like the US and China, ongoing conflicts in Ukraine and Gaza, and shipping disruptions affecting Vietnam’s exports and imports; 2) businesses encountering market, technology, and capital challenges; 3) the potential impact of US interest rate cuts on Vietnam’s exports and foreign investment; and 4) climate change affecting agricultural production and the slow recovery in global demand affecting industrial production in Vietnam.