IMF optimistic about Vietnam’s economic growth | Company

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Illustrative image (Source: VNA)

Hanoi (VNA) – The first half of this year has seen a rapid economic recovery as VietnamEased pandemic restrictions follow The source the adoption of a strategy for living with COVID and a robust vaccination campaign, according to an article published on the International Monetary Fund (IMF) website, imf.org.

Supporting policies such asWhat are the interest ratesStrong credit growth and the government’s socio-economic stimulus and development program have been accompanied by strong manufacturing output and a recovery in retail activity and tourism, according to the article.

The IMF recently raised Vietnam’s growth forecast to 7% this year, bringing it up a full percentage point from three months earlier and the only significant upward revision among major Asian economies.

The fund lowered the projection for next year by 0.5 percentage point to 6.7%, but that still contrasts with the bleak outlook elsewhere and would be the fastest pace among major Asian economies.

By contrast, growth estimates for Asia were lowered to 4.2% and 4.6% for this year and next in the IMF’s latest World Economic Outlook update, the article notes. .

Inflationary pressure in Vietnam was mainly limited to certain goods such as fuels and related services such as transport. Consumers are largely shielded from the global food price spike due to ample domestic supplies, lower pork prices from last year’s peak and a preference for rice, which remains cheaper than other cereals such as wheat. In addition, price increases for services, such as health and education, were also very moderate.

Consumer prices in the first seven months of the year rose, but remain below the central bank’s 4% target for the year. The economy’s delayed recovery last year kept core inflation, which excludes food and energy price volatility, below regional peers.

Inflation could however accelerate with the return to full throttle of economic activity. Higher costs for transportation and basic commodities such as fertilizer and animal feed could also drive up prices for a wider range of goods and services, adding inflationary pressure.

Vietnam’s recovery is also facing headwinds as global growth decelerates from 6.1% last year. The IMF’s World Economic Outlook lowered estimates to 3.2% this year and 2.9% next year amid the Russia-Ukraine conflict and a slowdown in China and major advanced economies. Such a slowdown implies reduced demand for Vietnam’s exports, especially from key trading partners like the United States, China and the European Union.

Additionally, financial conditions are tightening as interest rates in the United States and other advanced economies rise to curb inflation. This in turn increases financing costs and can lead to capital outflows.

Finally, greater uncertainty regarding global trade and financial markets could weigh on the recovery, particularly if some industries lose access to needed intermediate goods due to further supply chain disruptions. This could reduce foreign investment in Vietnam, slow down production and technological growth.

Together, these factors mean policy makers need to be nimble and make changes in a timely manner. Fiscal policy should play a leading role in supporting the recovery, while adapting flexibly to changing economic conditions.

The central bank should focus on rising inflationary risks and communicate that it is ready to act if needed and remains committed to hitting its inflation target, according to the article.

Authorities should also continue to address bad debts in the banking system and closely monitor potential risks in real estate markets to safeguard financial stability.

Addressing challenges related to labor, social safety net coverage and climate-related risks will further release Vietnam from its considerable growth potential and continue to move forward on a sustainable development path towards higher income status, according to the article./.

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