According to the Asian Development Outlook report released by the Asian Development Bank (ADB) on July 17, Vietnam saw an impressive first half of 2024, with GDP growth of 6.4 per cent year-on-year. This was largely driven by strong trade recovery, where exports grew 14.5 per cent and imports 17 per cent. However, the domestic segment remained sluggish, with final consumption growing only 5.8 per cent.

“Vietnam can maintain its growth momentum in 2024 through sustained trade recovery in export-led manufacturing and positive inflows of FDI and remittances, while making more efforts for growth restoration in services, stable agriculture production, and domestic consumption recovery,” said Mr. Shantanu Chakraborty, ADB Country Director for Vietnam.

Accordingly, ADB has maintained its projection for Vietnam’s economy to grow at 6 per cent this year and forecasts a further increase to 6.2 per cent growth in 2025. Inflation is also expected to remain benign at 4 per cent in both years, despite persistent pressure from geopolitical tensions and disruptions in global supply chains.

However, Mr. Chakraborty added that although its economy is expected to post solid growth this year and slightly higher growth next year, there are several external downside risks that could slow down Vietnam’s momentum, including softened global demand caused by slow economic recovery among its trading partners and continued geopolitical tensions, both of which would slow down the recovery of its export-led growth, while the lower pace of normalization of interest rates in the US and other developed economies would continue to put pressure on exchange rates.

“Growth in 2024 also depends on the effective implementation of the government’s fiscal measures and public investment,” he added.

In recent years, the relative slowdown in growth has exposed the risks of structural fragilities in Vietnam’s economy, for example the reliance on FDI-led export manufacturing, incipient capital markets, and an overreliance on bank credit, among others. If these risks are addressed in a timely fashion, Vietnam could achieve stronger growth.

Policy measures in 2024 would therefore need to combine short-term growth support measures to strengthen domestic demand with long-term structural remedies to promote sustainable development.

Elsewhere in the region, the ADB’s growth forecast for China, the region’s largest economy, is maintained at 4.8 per cent this year. A continued recovery in services consumption and stronger-than-expected exports and industrial activity are supporting the expansion, even as the country’s struggling property sector has yet to stabilize. The government introduced additional policy measures in May to support the property market.

The outlook for India, the region’s fastest-growing economy, is also unchanged at 7 per cent for fiscal year 2024. India’s industrial sector is projected to grow robustly, driven by manufacturing and strong demand in construction. Agriculture is expected to rebound amid forecasts for an above-normal monsoon, while investment demand remains strong, led by public investment.

For Southeast Asia, the growth forecast is maintained at 4.6 per cent this year amid solid improvements in both domestic and external demand. 

In general, the ADB has slightly raised its economic growth forecast for developing Asia and the Pacific this year to 5 per cent from the previous 4.9 per cent, as rising regional exports complement resilient domestic demand. The growth outlook for next year is maintained at 4.9 per cent.

Inflation is forecast to slow to 2.9 per cent this year amid easing global food prices and the lingering effects of higher interest rates.

“Most of Asia and the Pacific is seeing faster economic growth compared with the second half of last year,” said ADB Chief Economist Albert Park. “The region’s fundamentals remain strong, but policymakers still need to pay attention to a number of risks that could affect the outlook, from uncertainty related to election outcomes in major economies to interest rate decisions and geopolitical tensions.”