|Andrea Coppola, Lead Economist for the World Bank in Vietnam
Andrea Coppola, Lead Economist for the World Bank in Vietnam, grants to the Vietnam News Agency an interview on economic performance for 2023 and prospect for 2024.
Can you give one word to describe Vietnam in 2023?
I choose the word “resilient”. Given the features of the Vietnamese economy, the global economic slowdown has been a large negative shock for the country, but Vietnam was still able to sustain a rate of growth that many other countries in the rest of the world can only dream about.
How do you evaluate Vietnam’s economic performance in 2023 despite the challenging global context?
Vietnam is considered one of the most open economies in the world. Its strong trade relations with the rest of the world are a source of strength and success. At the same time, the reliance on demand from trade partners heavily exposed Vietnam to the global economic slowdown experienced in 2023. As a result, after the very difficult 2020 and 2021 COVID years, economic performance in 2023 was the least strong since the period following the Asian financial crisis at the end of the 1990s. However, I still consider Vietnam’s economic performance in 2023 to be positive considering the very challenging global context. Economic growth in the United States was about 2.5 percent in 2023. In the Euro area, economic growth was even weaker at about 0.5 percent. Despite the global challenges, Vietnam was able to continue growing at relatively fast rates. Authorities were able to increase public investments by about 35 percent with respect to the previous year in order to sustain economic growth. While these are impressive results, challenges remain, including those in terms of improving public investment execution, which becomes increasingly important for the future growth of Vietnam.
Many Vietnamese businesses experienced difficulties last year. Can you explain the cause of those difficulties?
The are two main causes. The first cause is associated with external factors. The global economic slowdown had a strong impact on the demand for Vietnamese exports. This external shock affected so many firms in the manufacturing sectors that focus their business on the production of goods that will be exported. Many workers in the manufacturing sector which is so important for the Vietnamese economy lost their jobs and saw their incomes affected. This brings to the second cause behind the difficulties experienced by Vietnamese firms which is associated with domestic factors. The challenging situation experienced by many Vietnamese workers led to a deceleration of domestic consumption which affected not only firms in the manufacturing sector but also many other businesses, including those in other sectors of the economy.
What have been the drivers that promote economic growth in the last half of the year?
The last part of 2023 showed signs of economic recovery. This recovery is driven by three main factors. The first factor is a gradual recovery of external demand for Vietnamese exports. Exports and imports contraction bottomed out in mid-2023 and trade performance improved during the second half of the year. Second, authorities played an important role to boost public investment which increased significantly with respect to 2022. Public investments are key because they support economic growth both in the short term and the longer term and further improving public investment management is a priority for Vietnam. Third, despite the strong shock that hit the economy, private consumption was resilient. The growth of retails sales which are a good proxy for private consumption was stable at about 7.5 percent since August. These growth rates are significantly slower than what experience before the COVID pandemic but despite that private consumption remains a key driver of economic growth.
What makes the international community notice Vietnam in 2023? What are Vietnam’s strongest traits?
Vietnam raised a lot of attention in 2023. Media outlets with global reach have published articles to underscore Vietnam’s performance and potential and the visits of world leaders to Vietnam attracted even more the attention of the international community. Vietnam is praised as an appealing destination for international investors because of its economic and political stability and its capacity to integrate in the global economy. I recall an article published by the Financial Times in July pointing to the opportunities for the Vietnamese economy and that Vietnam’s economic moment is now. In such a context, it is critical for Vietnam to continue strengthening the business environment and attract private investors’ attention to fully take advantage of the impact of global geopolitical developments on international investment and trade.
In 2023, although our GDP growth did not meet the set target, it is still a remarkable number when in 2023, the economy continuously faces many difficulties both internally and externally. What kind of context will await Vietnam’s economy in 2024?
The international context is expected to remain challenging in 2024. After the global slowdown experienced in 2023, global economic growth is expected to decelerate further in 2024, including in key trade partners for Vietnam such as the United States. The expected weak performance is the result of the lagged and ongoing effects of tight monetary policy, restrictive credit conditions, and weakening global trade. Downside risks predominate including geopolitical risks, the impact of conflicts on energy prices, financial stress associated with the increase in long-term yields, and weaker than expected activity in China. In such a context, it would be important for Vietnam to reduce its vulnerability to external shocks and increasingly leverage its internal strength and domestic productivity to support economic growth.
In such a context, do you think a GDP growth target of 6-6.5 percent is a challenge? Why? What are Vietnam’s economic growth prospects in 2024?
Given that global economic growth is expected to continue slowing in 2024, I think that the GDP growth target between 6 percent and 6.5 percent for 2024 is ambitious. Despite the global slowdown, demand for Vietnamese exports could gradually improve and we project economic growth to slightly accelerate but it will be challenging to reach 6 or 6.5 percent unless domestic demand, consumption and investment accelerate further. Authorities can play an important role to support the economy through fiscal policy, particularly by accelerating the implementation of transformational public investment and infrastructure projects which are going to strengthen economic growth both in the short term and in the longer term.
Last year, the National Assembly organized a Vietnam economic forum and mentioned strengthening internal strength. So what strengths do we have in Vietnam to promote growth in 2024 and what recommendations do you have to remove the barriers that are hindering our country’s economic development?
Vietnamese people are the country’s greatest source of the country’s internal strength. Vietnamese workers and entrepreneurs allowed the Vietnamese economy to grow by seven times during the last 30 years. To sustain this fast growth, also considering the challenging external environment, my suggestion is to continue promoting private sector development and boosting productivity. Vietnamese authorities can play a key role to help the country achieve this objective and I suggest doubling efforts on human capital development by upskilling the labor force and physical capital development through public investments in transport and energy infrastructure that can further strengthen the competitiveness of Vietnamese private sector.
What’s your message for Vietnam for 2024?
While we hope that the demand for Vietnamese exports from the rest of the world to recover in 2024, it is not going to be as strong as in the past and this challenging situation may last for some time. In this context, my message for Vietnam is to leverage its internal strength and boost the productivity growth of its domestic economy to transform the challenges provided by the global economic slowdown in an opportunity to further strengthen its economic growth model. I would also like to take this opportunity to wish everyone a healthy, prosperous, and successful 2024.-