Last week, Prime Minister Pham Minh Chinh ordered ministries and localities nationwide to apply all the best solutions to spur domestic production and business activities, which will help push up economic growth.
“The most important industry that needs boosting is manufacturing and processing, which is weakening,” PM Chinh stated.
“All efforts must be made to achieve all targets set earlier. Economic growth must be the No.1 priority now. We must boost both the aggregate supply and demand of the economy. To this end, there are three key drivers of growth including investment, export, and consumption,” PM Chinh stressed, adding that the State Bank of Vietnam has to “continue carrying out the effective, timely, flexible, and proactive monetary policy through the continuation of reducing lending rates, restructuring debts, and increasing money supply, in a more proper manner.”
The General Statistics Office (GSO) last week reported that after growing 3.32% in Q1 2023, the Vietnamese economy bounced back to 4.14% year-on-year in Q2, and 5.33% year-on-year in Q3.
The nine-month rate is 4.24% as compared to the corresponding period last year – lower than a target of 6.5% set earlier. The agro-forestry-fishery sector climbed 4.43%, while the year-on-year rates of the industry and construction sector, including the service sector, sat at 2.41 and 6.32%, respectively.
“Many sectors in the economy are gradually recovering, especially the industrial sector – its added value in Q3 reached 4.57% from 0.95% in Q2, and -0.75% in Q1 – in which the added value of the processing and manufacturing sector increased 5.61% in Q3,” Minister of Planning and Investment Nguyen Chi Dung reported to the government. “The socioeconomic situation has been bouncing back every quarter since June.”
In addition, the economy’s investment since early this year has been strongly boosted and become an important driving force for economic growth. Total year-on-year development investment climbed 3.6% in Q1, 5.6% in Q2, and 7.6% in Q3. The nine-month rate stands at 5.9% year-on-year, Minister Dung added.
“Furthermore, the service sector is bouncing back strongly. Total retail revenues and consumption service revenues ascended 2.4% in September, against August, and 7.5% as compared to the same period last year. The rate increased 9.7% in the first nine months of this year,” he continued.
In the first nine months, the added value of the industrial sector increased by 1.65% year-on-year, and that of the manufacturing and processing sector expanded by 1.98%.
Breaking down the situation, growing production has resulted in rising demand for electricity and fuel – the vital inputs for the economy.
The Ministry of Planning and Investment (MPI) reported that the economy’s production and distribution of electricity in the first nine months ascended 2.9%. The rate dropped 0.32% in Q1, before bouncing back to 1.79% in the first six months of the year.
Vietnam Electricity (EVN) reported that all of its activities in August “have been ensured, meeting increased demand for electricity of the economy.”
The group’s total electricity output in August reached 25.6 billion kWh – up 7.2% year-on-year. Cumulatively in the first eight months, the figure hit 186.3 billion kWh, up 2.7% year-on-year – in which the ratios of electricity contributors vary, with hydroelectricity (48.45 billion kWh – accounting for 26), coal-fired power (88.08 billion, 47.3%), gas turbines (19.26 billion, 10.3%), oil-fired power (1.23 billion, 0.7%), renewable energy (26.35 billion, 14.1%), and imported electricity (2.62 billion, 1.4%).
Also in the first eight months, EVN commenced construction of 41 works and put into operation 54 power projects, the group reported.
In another case, PetroVietnam reported in the first eight months of this year, it completed all plans assigned, including the exploitation of crude oil (7.06 million tonnes – exceeding the eight-month plan by 14.5%), in which, domestically exploited crude oil of 17.3%, and overseas-exploited crude oil surpassing 3%; production of 108,000 tonnes of nitrate – exceeding 5.2%; electricity production of 1.07 billion kWh – surpassing 4.2%; production of 588,600 tonnes of liquefied petroleum gas - exceeding 21%; assorted fuel (4.08 million tonnes, exceeding 48%); and polypropylene (117,700 tonnes, surpassing 15%).
Also in the first eight months, PetroVietnam’s total revenue is estimated to reach 575.8 trillion VND (25 billion USD), exceeding the initial plan of 27%. Its contributions to the state budget stand at an estimated 90.5 trillion VND (3.94 billion USD), which is 16% exceeding the whole year’s goal. PetroVietnam’s pre-tax profit is estimated to surpass the entire year’s target by 8%.
However, according to the GSO, despite some signals for recovery, businesses’ confidence has yet to strongly recover, due to lingering difficulties.
In the first nine months of this year, Vietnam saw 116,300 newly established businesses registered at 45.85 billion USD, using nearly 748,900 workers. This was up by 3.1% in the number of enterprises but down by 14.6% in registered capital and down by 1.2% in the number of employees – as compared to the same period last year.
If another 62.1 billion USD, registered by 35,600 operational enterprises is included, the total capital supplemented into the economy in the period stands at 108.57 billion USD – down by 34.2% year-on-year.
Meanwhile, the first nine months also saw 75,800 businesses with halted operations – up 21.2% as compared to the corresponding period last year; 46,100 enterprises stopped operations and waited for dissolution procedures – up 26.9%; and 13,200 enterprises completed such procedures. On average, about 15,000 businesses were kicked off the market every month.
Global analysts FocusEconomics said that looking ahead, Vietnam’s industrial production will likely contract 3.1% in 2023, before expanding 6.7% in 2024.
“The economy is projected to miss the government’s 6.5% growth target this year, due to subdued private spending and exports. However, stronger public spending and looser monetary policy mean Vietnam should remain among ASEAN’s top performers,” FocusEconomics said. “High levels of private debt and factories relocating from China, are key factors to watch. FocusEconomics panellists see GDP expanding 5% in 2023, and 6.3% in 2024.”
Meanwhile, in its recent global research report, titled “Vietnam Macro: Q3 GDP to show ongoing recovery”, Standard Chartered Bank forecasts Vietnam’s Q3 GDP growth to pick up to 5.1% year-on-year. A rebound is expected in H2, after early signs of a recovery in Q2. The bank’s 2023 GDP growth forecast remains at 5.4%.
According to the international bank, September data is likely to show a slight improvement over August, supported by retail sales. The bank expects September retail sales growth to stay robust at 8.2% year-on-year, exports are predicted to fall 6.2% year-on-year, imports to fall 7.0%, and industrial production growth to pick up to 3.2%.
The trade surplus may narrow to USD 1.3 billion. Inflation may rise again to 3.2% year-on-year, from 3% in August. Education, housing and food prices have driven inflation recently, while transport inflation has eased. Vietnam received close to 7.8 million foreign visitors in the first eight months of 2023, close to the full-year target of eight million. However, the recovery remains tentative – trade is still contracting, manufacturing could stay lacklustre for some time, and foreign direct investment recovery prospects are unclear, according to Standard Chartered.
Tim Leelahaphan, economist for Thailand and Vietnam at the bank, said, “While easing price pressures should allow policymakers to focus on growth, renewed concerns about an inflation rebound in H2 could deter such a move. With the economic recovery starting to gain momentum, there should be less need for monetary policy support.”
