The International Monetary Fund (IMF) forecasts that Vietnam would achieve GDP growth of 6.1% this year, higher than the forecast in June.

According to IMF experts after the regular consultation ended at the end of August 2023, Vietnam's economy achieved 5% growth despite many challenges, thanks to the Government's drastic policies. Woes in the real estate market, financial stress and sharp decline in exports have affected the economy.

Growth has started to recover since late 2023, thanks to exports and tourism, as well as looser fiscal and monetary policies. Therefore, the IMF forecasts GDP growth this year at 6.1%, higher than the nearly 6% forecast in its report in June.

Previously, Singapore's United Overseas Bank (UOB) lowered its growth forecast for Vietnam this year due to Typhoon Yagi, from 6% to 5.9%. Meanwhile, the ADB maintained its growth forecast at 6%. The World Bank (WB) expects this rate to be 6.1%. Meanwhile, Vietnam has set a GDP growth target of 6.5-7% for 2024.

Experts believe that domestic demand and real estate will continue to recover. Inflation is expected to be around 4-4.5% this year, mainly due to rising food prices. This level is equivalent to the State Bank's target.

However, the IMF believes that risks to Vietnam's economy remain high. In the first eight months of this year, Vietnam earned over USD 265 billion from exporting goods, an increase of nearly 16% over the same period last year. But exports - the main driver of the economy - could decline if global growth falls short of expectations, geopolitical tensions persist or trade disputes escalate.

At the same time, sluggish real estate and corporate bond markets are also affecting the operations of banks, undermining financial stability. Exchange rate pressure may persist as monetary policy remains loose. According to a report by the State Bank last month, the Vietnamese dong had depreciated by nearly 5% against the USD since the beginning of 2024. As of early August, this rate had dropped to 3.85%.

IMF assesses that the Vietnamese Government has responded quickly to stabilize the macroeconomy when the post-pandemic recovery process faces many challenges at home and abroad. The organization also welcomed Vietnam’s revision of the Law on Credit Institutions, the promulgation of the Power Master Plan VIII and the plan to develop an Emissions Trading System to achieve climate goals and promote energy security. However, experts recommend that Vietnam deepen reforms and ensure green, inclusive growth in the medium term. The fiscal framework, budgeting and revenue raising processes in the medium term need to be strengthened to support the development plan.

Going forward, the IMF recommends that authorities remain cautious in conducting monetary policy and increasing the resilience of the financial system.

Kylie Nguyen