IMF Forecasts 6.1% Growth for Vietnam in 2024 Despite Ongoing Challenges
The IMF projects Vietnam's GDP growth at 6.1% for 2024, supported by external demand and government policies, despite risks in exports and the real estate sector.
The IMF projects Vietnam’s GDP growth at 6.1% for 2024, supported by external demand and government policies, despite risks in exports and the real estate sector.
Key Points
- The IMF’s September report predicts Vietnam’s GDP growth for 2024 at 6.1%, with GDP expected to reach US$468.5 billion. This outlook is supported by robust external demand and government policies.
- While inflation remains within the targeted range of 4-4.5%, rising food prices have increased inflationary pressures. The report highlights persistent risks in the real estate and corporate bond sectors.
- Recommendations include strengthening fiscal policies and expediting public investments. The IMF emphasizes the need for continued reforms to enhance economic resilience and financial stability.
In its recent September report, the International Monetary Fund (IMF) significantly upgraded its 2024 GDP growth forecast for Vietnam to 6.1%, anticipating that the country’s GDP will achieve $468.5 billion by year-end. This optimistic projection stems from several positive indicators such as robust external demand, a resilient inflow of foreign direct investment (FDI), and supportive government policies targeted at economic recovery.
The IMF report indicates a gradual improvement in domestic demand, although challenges persist, particularly in the real estate sector, which is expected to take longer to stabilize. While inflation is likely to remain within the State Bank of Vietnam’s target range of 4% to 4.5%, rising food prices have been identified as a contributing factor to inflationary pressures, with core inflation remaining stable.
Vietnam’s external current account has shown a considerable surplus of 5.8% of GDP in 2023, primarily due to a decrease in import activity. The IMF commended Vietnamese authorities for their swift actions to uphold macro-financial stability amid various domestic and external challenges following the pandemic’s aftermath. Nevertheless, the report highlights substantial downside risks, including potential declines in export activities linked to global economic conditions, ongoing geopolitical tensions, and escalating trade disputes. Moreover, persistent pressure on exchange rates could exacerbate domestic inflation.
The IMF also raised concerns regarding vulnerabilities in the real estate and corporate bond markets, which could curtail banks’ credit expansion and subsequently undermine overall economic growth. In response, the report calls for enhanced measures to improve macro-financial stability and necessary reforms aimed at promoting robust, green, and inclusive growth.
To bolster economic activity, the IMF advocates for a proactive fiscal policy approach, realizing that while there is ample fiscal space, opportunities for monetary easing are limited. The emphasis is placed on expediting public investment projects, addressing existing bottlenecks, and expanding social safety nets to protect the most vulnerable populations. By the end of 2024, external debt is projected at 32.6% of GDP.
The IMF acknowledged Vietnam’s pace towards increased exchange rate flexibility and urged continuous modernization of the monetary policy framework. Strengthening financial system resilience through enhanced capital buffers, addressing non-performing loans, and improving transparency in the corporate bond market are also critical focal points. Overall, to support its developmental aspirations and economic resilience, Vietnam is advised to expedite public investments and enhance fiscal frameworks.
| This article was first published by Vietnam Briefing , which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in in China, Hong Kong, Vietnam, Singapore, and India . Readers may write to [email protected] for more support. |
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