Hanoi (VNA) – Vietnam’s growth support policy with monetary easing, a large amount of public investment to be disbursed in 2023, and the reopening of the China will help the country counter headwinds, according to Asian Development Bank (ADB) Country Director for Vietnam Andrew Jeffries.

Speaking at a press conference to release the Asian Development Outlook (ADO) on April 4, Jeffries said that the country’s economic growth will be constrained in 2023 by the global economic slowdown, continued monetary tightening in advanced economies, and spillover from global geopolitical tensions.

After a strong performance in 2022, its economic growth is expected to moderate at 6.5% this year and further expand at 6.8% in 2024, the ADO wrote.

The ADO highlighted that global economic slowdown deepened in the fourth quarter of 2022 and will likely continue in 2023. Falling global demand is expected to weigh on industrial growth, it said, adding that agriculture output is expected to grow by 3.2% this year on revived domestic demand and the reopening of China, which accounts for 45% of Vietnam’s export of fruits and vegetables.

Tourist arrivals from China from March 15 is expected to benefit the tourism and services in Vietnam, with the sector forecast to grow by 8% this year.

Public investment will be another key driver for economic recovery and growth in 2023 and 2024, spurring construction and other related economic activities. Along with the move to monetary easing in March 2023, public spending is expected to generate substantial multiplier effects, creating strong growth stimulus for the economy.

According to the ADO, the Vietnamese government is committed to disbursing 30 billion USD in the year, of which 90% had been allocated to ministries and provinces for disbursement since January 2023. Foreign investment, however, will still be hampered by the global economic slowdown. Newly registered and disbursed FDI fell by 38% and then 4.9% year on year in the first two months of 2023.

The prolonged pandemic, however, exposed structural issues that are among the main downside risks to the economy, said the report.

Nguyen Minh Cuong, Principal Country Economist for Vietnam, said that the fiscal deficit in 2023 could exceed the target, which is 4.4% of GDP. He said that Vietnam should continue reform to make its finances more sustainable, significantly reducing dependence on unsustainable revenue sources such as land and oil.

The ADB forecast that on the demand side, domestic consumption will continue to rebound in 2023. Revived tourism, new public investment and stimulus programmes initiated in January 2022, and a salary increase effective in July 2023 are expected to keep domestic consumption on the rise, though higher inflation may hamper its recovery.

Weakening global demand will continue to dampen trade in 2023. Exports in the first two months of 2023 decreased by 10.4% year on year, while imports dropped by 16%, it said.

Both imports and exports are forecast to shrink by 7% in 2023 and the next year. Slowing trade could create a current account deficit that equals 1% of GDP this year before moving back into surplus in 2024./.