Forecasting 2 GDP growth scenarios to reach the target by 2024

VEPR has just released two GDP growth scenarios. In the high scenario, growth in the fourth quarter and the whole year of 2024 will reach 7.4% and 7%, respectively.

VEPR proposed two scenarios of high and low GDP growth for the fourth quarter and the whole year of 2024. Photo: Tri Dung

Economic growth has many bright spots

By the end of the third quarter of 2024, Vietnam's economy has recovered relatively well amid optimism about the overall growth of the world economy in late 2024 and 2025. GDP growth after 9 months reached 6.82%, an increase of more than 1.5 times compared to 4.4% in the same period last year, with the main contribution from the industrial and service sectors.

At the seminar "Policy Dialogue: Growth Recovery - Prospects and Challenges", Mr. Nguyen Quoc Viet - Deputy Director of the Vietnam Institute for Economic and Policy Research (VEPR) analyzed in detail on the aggregate demand side, trade on the recovery track and positive FDI capital flows as the main growth drivers.

Import and export of goods increased faster than expected, with total import and export turnover reaching 578.5 billion USD, up 16.3% over the same period, with a trade surplus of 20.8 billion USD - a quite positive trade surplus in the period 2020 - 2024.

However, consumer spending remains below pre-pandemic levels and inflationary pressures in the first half of 2024 also dampen capital growth.

State budget revenue exceeded the plan, while public spending decreased compared to the same period in 2023, leading to a continued high budget surplus, creating room for continued fiscal policies in 2024 such as tax exemption, extension, and reduction policies, especially in the context of industries and fields suffering damage from typhoon Yagi .

Commerce growth positive, FDI capital reached a record high, tourism recovered strongly, USD exchange rates at domestic commercial banks have continuously decreased, with prices much lower than the ceiling set by the State Bank of Vietnam (SBV). The growth rate of money supply and credit growth recovered quite well, contributing positively to promoting growth and investment, although still lower than the average before the Covid-19 pandemic.

The State Bank of Vietnam has continued to implement relatively successful flexible monetary policies in the recent period to reduce shocks and intervene in liquidity, helping to lower interest rates and support capital costs for the economy without having to intervene in operating interest rates.

Forecasting two growth scenarios

Although the economy has many positive bright spots, the Deputy Director of the Institute for Economic and Policy Research warned that there are still risks and challenges ahead.

Mr. Nguyen Quoc Viet said that the purchasing management index (PMI) declined and fell below 50 points in September. The ratio of enterprises withdrawing compared to enterprises entering the market remains high. Consumption Domestic and public investment disbursement have not met expectations.

Looking further ahead, the trend of global economic and political fragmentation and extreme weather events due to climate change could reduce external demand. Push-up costs pose challenges to export competitiveness and the ability to participate more deeply in the global value chain.

Meanwhile, input factors in production face many barriers as well as difficulties in transforming the growth model, innovating the business environment and reforming institutions. Although some progress has been made, it is still slow, posing many risks in investment and business, discouraging the domestic and foreign business community.

In the context of mixed advantages, difficulties and challenges, VEPR proposed two high and low scenarios. With the high scenario, growth in the fourth quarter will be flat at 7.4%, and growth for the whole year of 2024 is expected to reach the new target of 7.0% set by the Government for 2024. With the low scenario, growth in the fourth quarter will be below 7%, and growth for the whole year of 2024 is forecast to fluctuate around 6.84%.

Source