New growth drivers to take Vietnam forward
While its old growth drivers have undoubtedly provided it with a host of benefits, Vietnam needs to identify and implement new growth drivers for continued growth, VnEconomy forum hears.
In a global economic context with many uncertainties and more difficulties than advantages, Vietnam is considered to have better growth, more optimism, and controlled inflation.
This is the opinion of Dr. Can Van Luc, Member of the National Financial - Monetary Policy Advisory Council, who spoke in the first Panel Discussion at the Vietnam Economic Scenario Forum 2024, co-hosted by VnEconomy / Vietnam Economic Times (VET) and the Ministry of Foreign Affairs (MoFA) on January 11 in Hanoi. The first Panel Discussion had the theme “The new global context: The new pressures and growth drivers for Vietnam”.
Dr. Luc believes that, in 2024, Vietnam can take advantage of stimulating growth without worrying too much, because inflation can be well controlled under set targets.
From another perspective, Mr. Suan Teck Kin, Head of Research, Executive Director, Global Economics and Markets Research, at the United Overseas Bank (UOB), said Vietnam’s economic growth prospects in 2024 are promising thanks to expectations that the US Fed will cut interest rates, resulting in exports recovering and stable growth being recorded in the region.
Mr. Kin believes that Vietnam benefits from shifts in global trade and supply chains. According to UOB research, in 2016, 21.6 per cent of US imports came from China, but by the end of 2023 the number had fallen to 14.1 per cent. Meanwhile, Vietnam’s nearly doubled, from 1.9 per cent in 2016 to 3.3 per cent in 2023.
In addition, Vietnam will see improvements in 2024, especially in the textile and garment sector, he noted. Main growth drivers such as exports and FDI attraction are forecast to have bright prospects this year.
“Vietnam has the advantage of a young workforce that absorbs technology quickly,” he told the Forum. “However, it is necessary to explore other competitive advantages, because it will soon have to face an aging population. Specifically, Vietnam should identify strong areas that it wants to focus on attracting FDI to, and adopt appropriate strategies and solutions.”
Meanwhile, Ms. Dang Nguyet Minh, Head of Research at Dragon Capital, said Vietnam’s economy will face more opportunities than difficulties in 2024.
There are two big opportunities for the country. Firstly, in the manufacturing industry, Vietnam had a difficult 2023 but this stemmed from the whole world going through a cycle of inventory cuts. Inventory levels, however, are returning to sustainable levels.
“We expect that Vietnam’s production has hit its bottom, and that 2024 will be a year of economic recovery,” she emphasized.
The second opportunity is the simultaneous reduction in interest rates. Last November, for the first time, more central banks around the world reduced interest rates than raised them. This is a necessary condition. In an economy, interest rates are the foundation for investment growth. Vietnam is ahead in cutting interest rates but is in sync with the world.
To create growth momentum in 2024, Dr. Luc emphasized the need to consolidate and renew existing growth drivers, focusing on restructuring the economy after a long period of decline due to the pandemic and delays in dealing with weak businesses and projects.
“More importantly, Vietnam must promote and exploit new growth drivers, with the emphasis being on accelerating the process of perfecting institutions, in particular guiding the implementation of laws on land, housing, real estate business, and credit institutions, and other amended laws, and support mechanisms in the context of applying the Global Minimum Tax,” he said. “It is also necessary to promote green growth, fully and promptly issue documents guiding the implementation of the Law on Environmental Protection 2020, have specific plans to respond to climate change, implement the Green Growth Strategy and Circular Economy Development Project, and commit to net-zero carbon emissions by 2050.”
Meanwhile, Mr. Kin said that in the medium and long term, Vietnam needs to enhance productivity and workforce efficiency. To improve the country’s competitiveness, he recommend that it invest more in education and science and technology.
According to Ms. Dorsati Madani, Senior Economist at the World Bank (WB), Vietnam needs to change to restore the private sector, along with gradually recovering domestic consumer spending. In addition, besides international trade, domestic trade must also be promoted.
She also recommended that Vietnam continue to focus on green transformation and digital transformation, because these will be inevitable trends globally in the near future.
“We recommend policy tools on taxes and green credit to support industries, gradually eliminating the use of coal and switching to clean energies such as wind and solar,” she said.
