FOCUS & ACTION
Economists and stakeholders share their thoughts with VET on the prospects for Vietnam’s economy and measures in need.
024 has some important points. First, the wage policy will be implemented, contributing to increasing aggregate demand in the economy and boosting domestic consumption. However, when wages increase, prices also increase. Therefore, it is necessary to have a policy to maintain or reduce prices. If wages increase and interest rates decrease, inflation will rise by the end of the year.
Next, when aggregate demand increases, it stimulates aggregate supply. Accordingly, businesses need to expand their scale. Policies are needed to encourage investment in new industries to meet new needs. It is also necessary to encourage business restructuring, focusing on innovation, and to strengthen startups to create a strong domestic business community and gradually reach out to the world. This will be a driving force to promote economic growth.
The world economic context in 2024 will be better than in 2023 because tensions are coming to an end and countries have better adapted amid supply chain disruptions.
In addition, the world economic structure has changed, such as the shift to a new energy structure, digital transformation, and technology unicorns that will create new steps for the economy. The participation of international institutions has been more effective and substantive. These driving forces make the world economic context more optimistic.
Meanwhile, Vietnam is a highly open economy. In my opinion, we need to transform the growth model, eliminate outdated industries that consume a lot of energy and labor, move to new industries, and develop technology businesses and new energy-using businesses, comply with green standards, and develop sustainably. As I mentioned, the world is also shifting to a new energy structure. For Vietnam, energy transition is an important transformation because this is a basic industry under Resolution No. 29 from the Politburo on the economic structure. Changes in the energy industry lead to changes in other industries. Successful energy conversion will save energy, increase energy efficiency, and reduce emissions according to international commitments, thereby curbing waste and raising the overall efficiency of the economy.
Vietnam also needs to focus on training high-quality human resources for digital transformation and green transformation. ◼
To achieve Vietnam’s growth goals, we must first promote and improve the effectiveness of existing growth drivers, including investment and imports and exports. For these drivers to improve and develop, institutions and policies play a key role.
Regarding new growth drivers, Vietnam should focus on new fields: the digital economy, the circular economy, high technology, and semiconductors. It has advantages in rare earths, in policies to attract foreign investment, and from upgrading comprehensive strategic partnerships with the US and Japan, which are two countries that have committed to and supported Vietnam to develop high technology and semiconductor technology. These are driving forces not only this year but also in the years to come.
However, these are new sectors, and regardless of the country, even the US or China, the government must play the role of “midwife and nurturer” of the economy. During the initial period, the government can provide institutional, financial, and human resources support so that new fields have sufficient basis to form and develop.
The government has issued many policies to promote the economy recently, but when implemented they have not been overly effective. In the future, the government needs to direct ministries, branches, and localities to review each policy and prepare specific roadmaps and plans for implementation. At the same time, the responsibilities of ministries, branches,
and localities must be attached to policy implementation. For example, in terms of disbursement of public investment capital, as of November 2023 there were still 21 ministries, branches, and central agencies and 33 localities that had not allocated all of their public investment capital.
There are a number of breakthrough policies in 2024 that need to be implemented. The first is the policy on the disbursement of public investment capital, from which it moves to non-State investment, especially foreign investment in new fields such as the semiconductor industry, renewable energy, and the circular economy.
Vietnam’s economy is increasingly open, so if the world economy fluctuates or weakens, it will have a strong impact on Vietnam’s economy. In fact, in 2023, one of the four growth drivers, exports, was strongly affected by the world economy. The world economy this year is forecast to decline even more than in 2023, so the government needs to have specific solutions and policies to promote the domestic economy, especially imports and exports.%
This year will present its own unique set of difficulties. Though Vietnam is expected to be a leader in GDP growth, the economic environment will likely not be as favorable as pre-2020. We need to brace ourselves for ongoing issues such as reduced exports and imports, persistent supply chain disruptions, and other unexpected challenges that demand our immediate focus and action.
In response to recent shifts in global supply chains, European firms are exploring more diversified and resilient sourcing options. Vietnam’s transition from an economy primarily focused on agriculture and basic manufacturing to one that emphasizes advanced technology and sustainable products and services is also a key driver. This shift directly corresponds with European investment priorities and consumer demand. Increasingly, European companies are investing in these growth sectors in Vietnam as part of their own global strategies, while European consumers are seeking sustainable goods and services. These trends are both likely to continue long into the future, which presents room for growth for Vietnam’s export market. As Vietnam navigates the current challenges and opportunities, adaptive policies will be key. By regularly fine-tuning strategies to match the evolving landscape, Vietnam can position itself to capitalize on future opportunities.
Firstly, there’s a major need to make administrative tasks simpler. Right now, more than half of our members find that complicated paperwork for things like permits and business registrations slows them down. By digitizing these processes, cutting down on red tape, and enhancing transparency, Vietnam can position itself as a more investor-friendly destination. In terms of regulations, clarity and consistency are necessary, particularly in customs and trade logistics.
It is also crucial to simplify the process for obtaining visas and work permits for foreign experts. This will help bring more skilled people to Vietnam, which is important for sharing knowledge and attracting investment.
Improving regulations around importing, exporting, and business operations is essential too.
Finally, enhancing both physical and digital infrastructure is a critical step. Upgrading roads, ports, and logistics systems, together with strengthening digital infrastructure, is key to improving the movement of goods and attracting more FDI. This includes upgrading physical transport networks and boosting digital connectivity and services, which are essential in supporting modern, technologydriven trade and business operations. While there has been notable progress in infrastructure development this year, more needs to be done to increase regional competitiveness. ◼
Vietnam’s economy faces more opportunities than difficulties in 2024. There are two major opportunities in particular for the country.
First, in the manufacturing and processing industry, Vietnam had a difficult 2023 but this stemmed from the whole world going through a cycle of inventory cuts. Dragon Capital’s research shows that global European and American manufacturer and retailer inventory indexes have returned to sustainable levels. Previously, inventories increased due to businesses raising stockpiling purchases because of expectations of recovery in the post-Covid-19 economy. This quantity of goods cannot be sold when consumers prioritize spending money on services and travel rather than consumer goods. Therefore, the stable inventory index is a sign of Vietnam’s opportunity to increase the export of goods by 2024. We expect that Vietnam’s production has hit its bottom, and that 2024 will be a year of economic recovery.
The second opportunity is the simultaneous reduction in interest rates. Last November, for the first time, more central banks around the world reduced interest rates than raised them. This is a necessary condition. In an economy, interest rates are the foundation for investment growth. Vietnam is ahead in cutting interest rates but is in sync with the world.
With investment trends, the cash flow trend of both FDI and indirect investment in the stock market will be stronger and clearer in 2024.
For the export sector, the bottom has passed, and we are starting a new recovery cycle. Public investment has also begun and this is a necessary foundation.
Public investment was a bright spot during the recent economic crisis and is forecast to continue to remain positive in 2024 and subsequent years. Public investment is promoting its role in leading investment in society and rebuilding confidence in the economy for the business community. ◼