Many driving forces for Vietnam's economic growth

Vietnam's economy gradually regains its form

In its recently released Vietnam economic update report, the World Bank forecast Vietnam's GDP to grow by 6.1%, much higher than the 5.5% the organization predicted in April.

According to the World Bank, Vietnam's GDP continues to grow, likely reaching 6.5% in the next two years. In addition to the World Bank, many other international financial organizations also forecast Vietnam's growth this year at 6%, including the IMF, ADB, UOB and Standard Chartered. HSBC even forecasts an increase of 6.5%.

Assessing the forecasts of the World Bank and international organizations, Associate Professor Dr. Nguyen Thuong Lang - senior lecturer at the National Economics University - said that Vietnam's economy in the coming time can completely grow to 6.5%, even approaching 7% because there are many good drivers and opportunities for development. After a year of stagnation due to the impact of the COVID-19 pandemic, Vietnam has gradually regained its form.

Vietnam has many positive driving forces that mainly help economic growth such as: domestic consumption, public investment, import and export and foreign investment capital. In addition, according to this expert, Vietnam currently has a series of driving forces to promote growth in digital transformation, green transformation, business environment and specific mechanisms.

Vietnam has many institutions to take the lead, shift towards digitalization, comply with sustainable development standards and solve social problems. This is the new driving force for Vietnamese enterprises to adjust their strategies, and the State to adjust policies to seize great opportunities from the international community.

Vietnam’s growth is expected to improve further, driven by a recovery in exports, tourism, consumption and investment. Despite the outlook, risks remain both external and domestic.

According to Associate Professor Dr. Nguyen Thuong Lang, in addition to a series of opportunities and positive motivations, Vietnam is also facing a number of challenges such as competition with regional rivals in terms of export goods . The ability to grasp and develop new technology and high-tech industries is still limited. “To take advantage of opportunities and overcome challenges, Vietnam can implement a number of new solutions and motivations for Vietnam's development, including: Digital transformation, green transformation and improving the business environment. Create specific mechanisms for localities to better exploit local strengths. Banks need to participate more actively in the process of promoting and supporting economic development, instead of just being a place to collect interest. Reform the banking system to better serve the goals of socio-economic development" - Associate Professor Dr. Nguyen Thuong Lang said.

Implement flexible monetary policy

According to the World Bank's assessment, despite many opportunities, Vietnam continues to face limitations in its ability to continue cutting interest rates, due to the large interest rate gap between the domestic and international markets in addition to pressure on exchange rates.

Commenting on this statement, Dr. Chau Dinh Linh - Economic expert, Lecturer at Banking University of Ho Chi Minh City said that our country is currently aiming to maintain stable interest rates as from the beginning of 2024 to now to support and enhance the recovery of economic entities. The State Bank of Vietnam is making efforts to maintain and further reduce interest rates not through operating interest rates but through measures such as: Encouraging banks to reduce costs; using the open market; coordinating on the interbank market and implementing support credit packages...

In addition, high exchange rate pressure due to the interest rate gap between Vietnam and the world has led to foreign capital flowing out of Vietnam. Despite the "surrounding" pressure, the exchange rate situation has recently tended to be more stable thanks to the monetary policy coordination of the State Bank and the forecast that the US Federal Reserve (FED) will cut interest rates. From there, the exchange rate risk will decrease, and the room for Vietnam's monetary policy will increase.

“In recent times, the State Bank has had flexible monetary policies, operating smoothly towards the stability of currency value, safety - stability of the banking system with many different tools such as flexible credit limits, operating smoothly the OMO market, central exchange rate, operating interest rate, ... but there are still risks that need to be well controlled such as: credit risk, exchange rate risk, liquidity risk, ... In the coming time, to prevent credit risks, Vietnam needs to ensure the bad debt ratio is at a controllable level, below 3% for the whole system" - Dr. Chau Dinh Linh proposed.