Asian countries estimated to grow by 6% up 2023 including Vietnam

In its flagship World Economic Outlook report, the International Monetary Fund (IMF) projected that India would be the fastest-growing economy in the world, despite confronting considerable challenges such as financial sector turmoil, inflationary pressures, effects of the Russia-Ukraine war, and the persistent impact of the Covid-19 pandemic over the past three years.

IMF revised its 2023 global growth projections in response to cooling economic activity due to higher interest rates but warned that a sharp rise in financial system turmoil might push output to near recessionary levels. Projections for global economic growth in 2023 were reduced to 2.8 per cent. It was 0.1 percentage point less from the last IMF update in January and a 0.6 percentage point decrease from global economic growth in 2022. The IMF forecast global real GDP growth at 2.8 per cent for 2023 and 3 per cent for 2024 in its latest World Economic Outlook report. It marks a distinct slowdown from 3.4 per cent growth in 2022.

Despite facing formidable challenges, India stands tall and steadfast, emerging as a beacon of resilience in the global economy. She has emerged relatively unscathed, although the report lowered India's growth projection to 5.9 per cent. The last World Economic Outlook report had placed it at 6.1 per cent. The IMF's bi-annual report observed that India's headline retail inflation is expected to ease up, from 6.7 per cent in the previous year to 4.9 per cent in 2023-24. This is a clear indication of India's economic prowess and its unwavering determination to overcome even the toughest of obstacles.

IMF Managing Director Kristalina Georgieva has praised India's efforts in leveraging digitalization to overcome the challenges posed by the Covid-19 pandemic, which has not only helped the country weather the storm but also created new opportunities for growth and employment. In an interview with the Indian news agency PTI, Georgieva declared India as a "bright spot" in the world economy, with the country expected to contribute a significant 15 per cent of the global growth in 2023.

While, Vietnam’s economic growth is projected to ease to 6.3 percent in 2023 from a robust 8 percent last year, as services growth moderates and higher prices and interest rates weigh on households and investors, according to the World Bank's report released on March 13.

WB Country Director in Vietnam Carolyn Turk said Vietnam has the fiscal space to implemet measures to boost growth, unlike many other countries. “Effective implementation of priority public investments is key to support growth, both in the short-term and in the longer-term. Also, fiscal and monetary policies must be synchronised to ensure that support to the economy and macroeconomic stability are achieved effectively,” she said.

Service has become the largest sector of Vietnam's economy, increasing from 40.7% of GDP in 2010 to 44.6% in 2019. The employment share of the sector also rose from 29.6% in 2010 to 35.3% in 2019. As the largest source of employment, it has absorbed a significant portion of the workforce from the agriculture sector.

However, labour productivity and efficiency in Vietnam’s service sector remain low compared to other countries, reaching 5,000 USD per worker in 2019 in comparison to 20,900 USD in Malaysia, 9,300 USD in the Philippines and 7,300 USD in Indonesia.

According to WB senior economist Dorsati Madani, if utilised effectively, the service sector could play an important role in supporting Vietnam's sustainable productivity growth and achieving the goal of becoming a high-income economy by 2045. Priority should be given to removing trade and foreign investment barriers in this sector and launching reforms to improve competition and access to finances for domestic firms. Services that can further drive growth in other industries, specifically in manufacturing and processing, should be heeded.