Cornerstones Supporting Vietnam's Economy

Acknowledging the challenges faced, it is imperative to recognize that 2023 poses difficulties for the Vietnamese economy. The Asian Development Outlook report released in December 2023 adjusted Vietnam's economic growth forecast for the year to 5.2%, a decline from the earlier projection of 5.8% in September 2023. Nevertheless, Vietnam's economy has demonstrated commendable resilience in 2023 when compared to other economies in the region.

On the whole, Vietnam's macroeconomic foundation continues to feature monetary easing, with inflation being well-controlled at 3.8%, below the targeted 4%. The fluctuation of the VND/USD exchange rate, influenced by the interest rate differential between the U.S. Federal Reserve (Fed) and the State Bank's operating interest rate, remains well-managed at approximately 3-5% within the operating margin.

JOURNALIST: - You mentioned public investment as a key driver of Vietnam's economic growth. Could you elaborate on that?

Mr. SHANTANU CHAKRABORTY: - While public investment disbursement reached 75% of the 2023 plan by November, a strong 22% increase compared to 2022, it might not reach the full target. However, with more efficient execution, public investment can significantly boost economic recovery. It's an effective fiscal stimulus tool, and Vietnam still has room for it, with public debt well under control at 38% at the end of 2022.

However, while achieving the planned disbursement rate is crucial, ensuring the quality of public investment is equally important. This requires improvement to ensure it truly contributes to sustainable development in the short and long term.

- You mentioned that attracting foreign direct investment (FDI) is another crucial pillar for Vietnam's economic growth. Can you explain why this is so important, especially in 2023?

- Despite global challenges in trade and investment, Vietnam has done remarkably well in attracting FDI in 2023. By November, total FDI registrations reached an impressive USD 29 billion, a 14.8% increase compared to the same period last year. Even more importantly, disbursed FDI, the actual amount of invested capital, reached USD 20.3 billion, a 2.5% increase and the highest 11-month figure in the past six years.

One key advantage of FDI is that these companies tend to focus on long-term benefits rather than being swayed by short-term fluctuations. With political stability and improving economic performance across Asia, particularly in Southeast Asia, Vietnam's business environment has become increasingly attractive to foreign investors.

However, in the face of growing competition for FDI across Asia, Vietnam needs to stay ahead of the curve. This means continuously improving the business environment, maintaining macroeconomic stability, and especially, boosting transparency and ensuring policy consistency. These measures will build trust with investors and encourage them to choose Vietnam over other destinations.

Looking further ahead, Vietnam needs to strengthen its infrastructure investments to enhance its economic competitiveness. This includes developing multimodal transportation networks, digitizing customs processes, and providing reliable access to clean energy. These investments will make Vietnam even more appealing for FDI in the long term.

- Vietnam aims for an ambitious economic growth rate of over 6% in 2024. How realistic is this target, given the potential headwinds from a slowing global economy and rising geopolitical tensions?

- While the global outlook for 2024 isn't as rosy as 2023, the Asian Development Bank (ADB) remains optimistic about Vietnam's prospects, maintaining its growth forecast at 6%. This optimism stems from Vietnam's strong macroeconomic fundamentals, built on a proactive and flexible monetary policy and prudent fiscal management. These create a solid foundation for maintaining growth momentum even in a slower global environment.

However, Vietnam can strengthen its growth momentum further by ensuring better coordination and implementation of its economic policies. This will be crucial in translating policy decisions into tangible results for the economy.

The key drivers of Vietnam's growth in 2024 are expected to be:

Firstly, public investment: Allocating the significant public investment budget (around USD 30 billion) effectively into quality infrastructure projects will stimulate economic activity throughout the country. This will benefit sectors like construction and mining, while creating jobs and boosting overall economic dynamism.

Secondly, domestic consumption: By adopting supportive fiscal measures and maintaining moderate interest rates, Vietnam can encourage people to spend more, leading to increased domestic consumption and a strong internal market.

Thirdly, exports: Vietnam needs to actively expand its export markets and leverage existing free trade agreements to boost sales abroad. This will help diversify the economy and make it less reliant on external factors.

In the short term, expanding fiscal policy and maintaining supportive monetary policy will be crucial to drive growth. However, in the long run, Vietnam needs to prioritize financial investments in infrastructure to enhance its competitiveness and lay the groundwork for sustainable development.

- Thank you very much.

Việt Vũ (interviewer)