Vietnam's economy to see gradual recovery in 2024: World Bank

Exports are expected to rise by 3.5 per cent in 2024, fuelled by a gradual improvement in global demand. The real estate sector, which has been lagging, is predicted to see a turnaround later this year, boosting domestic demand as investor and consumer confidence returns. Predictions for real total investment and private consumption are set to increase by 5.5 per cent and 5 per cent respectively in 2024, as per the Taking Stock report by the World Bank.

The report emphasises the crucial role of sustained fiscal policy support to bolster the economy. It recommends accelerating infrastructure investment projects funded by public resources, which could potentially add an additional 0.1 percentage point to GDP growth for every 1 percentage point increase in public investment as a share of GDP. However, the scope for further interest rate cuts remains limited due to the interest rate differential between domestic and international markets.

Challenges such as weak revenue collection and increased spending are expected to widen the fiscal deficit to 1.6 per cent of GDP in 2024. This is anticipated to narrow to 1.1 per cent in 2025, aligning with the country’s fiscal strategy for 2021-2030. Additionally, ensuring the stability of the financial sector is highlighted as paramount, with attention on managing potential risks like increasing bad debts and the declining asset values in the real estate sector. The capital buffers of commercial banks are noted as relatively thin, which could be further strained by the real estate downturn.

The report also addresses the need to support innovative startups to boost Vietnam's productivity growth. It suggests revamping Program 844 to build a pipeline of investment-ready firms, streamlining regulations to ease investments, and enhancing the contributions of academia and public research.

“Investing in public infrastructure projects goes beyond immediate economic stimulus,” said World Bank East Asia and Pacific practice manager for macroeconomics, trade, and investment Sebastian Eckardt. “Efforts to enhance public investment management will also address critical infrastructure gaps in energy, transportation, and logistics, which are fundamental for Viet Nam's long-term economic growth.”

Fibre2Fashion News Desk (DP)