Vietnam's economic growth for the year 2023 has slowed to 5.05%, compared to an expansion of 8.02% in the previous year, according to official data released by the government's General Statistics Office. The growth fell below the government's target of 6.5% and was lower than the average growth of 5.87% during the previous decade. The slowdown was attributed to weak global demand and a stall in public investment amid an intensified anti-graft crackdown.
Vietnam, a key regional manufacturing hub heavily reliant on trade, experienced a 4.4% decline in exports in 2023, reaching $355.5 billion. Smartphone shipments, a major foreign currency earner, dropped 8.3%, contributing to the overall export decline. The industrial production index in 2023 rose by 1.5%, while average consumer prices increased by 3.25%. Retail sales, however, showed resilience, recording a growth of 9.6%.
Despite falling short of the government's target, the GSO stated that the growth was still positive, positioning Vietnam among the fastest-growing economies in the region and globally. The country's central bank has implemented measures to boost economic growth, including four policy rate cuts this year. However, credit growth remains weaker than the targeted 14%.
In an effort to counter the decline in exports, Vietnam has extended a value-added tax cut to stimulate domestic consumption. Authorities are also working to accelerate public investment, primarily in infrastructure. However, public investment faced challenges in 2023 due to an intensified anti-corruption campaign, affecting the disbursement of funds.
The trade surplus for the year reached $28 billion, supported by an 8.9% decline in imports, totaling $327.5 billion. A significant trade surplus is favorable for the dong currency, but the sharp fall in imports may indicate a slowdown in manufacturing activities in the coming months.
While Vietnam recorded a GDP growth of 6.72% in the fourth quarter, faster than the third quarter and the same period last year, some analysts, including Capital Economics, express caution. They suggest that the momentum may not last if exports weaken and commercial banks reduce lending due to a rise in non-performing loans. Capital Economics forecasts Vietnam's growth for 2024 at 6.0%, and the central bank is expected to consider further rate cuts to support the economy. Vietnam's legislature approved government targets for 2024, including GDP growth of 6.0% to 6.5% and inflation in the range of 4.0% to 4.5%.
