ADB’s principal country economist: Vietnamese economy grows impressively

He said factors behind the strong recovery include macro-economic and political stability as well as success in containing COVID-19. The recovery was relatively even across all growth engines, from industry, agriculture to services while export rebounded. Foreign and domestic investors’ confidence also fueled economic growth.

According to him, the biggest risk faced by the Vietnamese economy was the impact of external factors such as global inflation and depreciation of several domestic currencies against US dollar.

Even though the inflation rates in Southeast Asia, including Vietnam, were lower, there is a big risk of rising, he said, adding that the Vietnamese currency devalued little against US dollar, which helped with macro economic stability but putting increasing pressure on the foreign reserves. However, it appreciated against those of trade partners that directly compete with Vietnam like Malaysia, Thailand and the Philippines.

Against that setting, the State Bank of Vietnam (SBV) raised ceiling deposit and lending rates, widened the trading band of USD/VND exchange rate from ±3% to ±5% which is completely appropriate, contributing to stabilising macro-economic conditions for mid and long-term growth.

The depreciation of the Vietnamese dong, a trend that is likely to continue, will support export but damp imports. However, Vietnam still posted a trade surplus of 8 billion USD as of mid-October.

In his opinion, Vietnam needs to flexibly adjust the exchange rate band and raise interest rates at an appropriate level while closely managing foreign exchange and bank markets following lessons from 2008-2010 crisis.

As long as trust of foreign investors and the public remain, Vietnam’s measures are proving effective.

ADB Country Director for Vietnam Andrew Jefffries said the lender still maintains its forecast of 6.7% economic growth for Vietnam in 2023, with all risks taken into consideration.

With a number of signed free trade agreements, Vietnam could access countries and markets worldwide. It is groundless to say that recession and slow growth in several nations will have a spillover effect on Vietnam’s export activities as its shipments to other countries may increase, he said.