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Here is your Mekong Memo Vietnam for December 21, 2023.
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ADB Perspectives for 2023 and 2024
The Asian Development Bank (ADB) has adjusted Vietnam's GDP growth forecast for 2023 to 5.2%, down from the earlier 5.8%, citing a weaker-than-expected recovery in external demand affecting industry and services. Inflation is projected to remain at 3.8% for 2023, rising to 4% in 2024. For 2024, ADB projects a 6% GDP growth, driven by public investment, domestic consumption, and export recovery. ADB's Country Director for Vietnam emphasizes the importance of macroeconomic stability, prudent fiscal policies, and proactive monetary policies for maintaining growth momentum. He advises Vietnam to accelerate public investment in infrastructure and adopt fiscal measures to boost domestic consumption. Long-term strategies include investing in green energy transition and infrastructure upgrades to enhance economic competitiveness and sustainability.
Economy Resilient According to WB Economist
Vietnam's economy has shown resilience in 2023, according to World Bank (WB) Lead Economist Andrea Coppola. Despite a challenging global context, with modest growth in the US and Europe, Vietnam continued to grow at a relatively fast pace. The recovery is attributed to recovering external demand, increased public investment, and strong private consumption. Vietnam's political stability and integration into the global economy make it an attractive destination for investors. The World Bank suggests Vietnam leverage its strengths and focus on productivity growth, transformative public investments, and infrastructure projects to shore up economic growth. Vietnam's economic growth is projected to slow to 4.7% in 2023, with a recovery expected in the following years.
Read more: SGGP
Trade Surplus Hits Record High
Vietnam's trade surplus in 2023 soared to a record $26 billion, nearly tripling from the previous year. The Ministry of Industry and Trade reported a decline in exports by 4.6% to $354.5 billion, attributed to weak demand in major markets. However, the country's strong trade performance contributed to strengthening foreign exchange reserves and keeping the dong firm. The ministry anticipates continued growth in exports and aims for a $15 billion surplus in 2024, leveraging free trade agreements and political relations.
Wrap Up: Late Stories of Xi Jinping Visit
After the majority of the news posted last week about Xi Jinping's recent visit to Vietnam, (on the heels of visits by leaders from the US and Japan) there were several new articles this week highlighting how the visit is a marker of Vietnam's growing importance in global and regional affairs. Economically, Vietnam is crucial for China, especially as China faces challenges in reviving its economy. The visit resulted in 36 agreements, focusing on trade, investment, security, and a shared vision for the future which augurs well for regional stability and economic growth. Tensions remain over disputes in the South China Sea, however, reminding us that there is a complexity to the relationship.
Read more: Nikkei Asia (VN Self-Confidence), Fulcrum (Common Destiny), Yahoo News (Post-Biden Perspective), Yahoo Finance (Economic Deal Insights), CGTN (Socialist Perspective), Xinhua News (Partnership), Times of India (Significance)
The Limits of Friend-Shoring
Vietnam is navigating a complex path in global manufacturing, balancing its rise as a favored offshore destination with the emerging concept of 'friend-shoring.' The strategy, endorsed by the United States, is intended to mitigate risks by relocating supply chains to politically stable and friendly nations (oftentimes this simply means “not China”). Vietnam's position in this dynamic reflects both its growing economic importance and the challenges of aligning with global friend-shoring trends while maintaining its unique geopolitical relationships (again, particularly with China).
Read more: The Telegraph
Workforce Reductions Despite Optimism
A recent survey by Navigos Search reveals that 56% of Vietnamese companies have had to lay off staff, reflecting a tough economic environment. Despite this, there's a sense of optimism for the future, with 59% of these companies planning to increase their workforce by about 25% next year. The survey, involving 555 companies and 4,000 employees, shows especially significant layoffs in the stock market, construction, real estate, and consulting services industries. The report also notes that this global trend of mass layoffs is not limited to Vietnam, with global technology firms being the most affected internationally.
Read more: Tuoi Tre News
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