Vietnam's economic recovery gains momentum despite global uncertainties
VOV.VN - Vietnam’s economic recovery is gaining momentum despite heightened global uncertainty relating to issues such as the protracted war in Ukraine, higher commodity prices, and tightening global financial conditions, according to the World Bank (WB).
The assessment was released as part of the May edition of the WB’s monthly Vietnam Macro Monitoring.
According to the report, after peaking in March the number of new confirmed COVID-19 cases declined rapidly in April, whilst mobility and economic activities continued to recover as industrial production and retail sales grew at their pre-COVID rates of 9.4% on-year and 12.1% on-year, respectively.
While export growth accelerated, import growth plateaued, duly reflecting supply chain disruptions caused by the impact of China’s continued zero-COVID policy. Amid heightened global uncertainty, FDI commitments slowed for the third consecutive month, while FDI disbursement remained strong.
Furthermore, CPI inflation rose slightly from 2.4% in March to 2.6% in April, whilst core inflation climbed to 1.5%, a 17-month high and partly reflecting the recovering demand that was buoyed by consumer expenditure associated with the two national holidays.
Despite the acceleration of credit growth to reach a new high of 16.4% on-year, overnight interbank interest rates dropped to 1.37% as of the end of April, far below the 2.5% discount rate offered by the State Bank of Vietnam, indicating excessive liquidity within the domestic market.
The budget registered a fourth consecutive month of surplus due to strong revenue collection amid a continued strong economic performance and falling expenditures. At present, Vietnamese recovery is gaining momentum, although authorities must remain vigilant regarding inflation, heightened risks of weaker global demand, and supply disruptions which could hinder economic prospects.
Moreover, uncertainty related to the war in Ukraine and its impacts on major commodity supply and prices are expected to weaken global growth prospects, potentially affecting demand for Vietnamese exports. In line with this, supply disruptions caused by lockdowns in China could hurt Vietnamese exports over the coming months.
In the event that higher inflation persists in the medium term, the economy should be allowed to adjust to higher prices, with the authorities incentivising investments in order to increase productivity and aggregate supply.
Experts have therefore advised local businesses to diversify trade partners as a prudent strategic consideration in order to mitigate risks to export performance.
VOV/WB