Hanoi (VNA)ꦉ - The Executive Board of the International Monetary Fund (IMF) has just released the conclusion of its Article IV consultation with Vietnam for 2024, forecasting that Vietnam’s economy will grow by 6.1% in 2024.

Recovery driven by exports and tourism

Despite a challenging 2023, Vietnam’s economy grew by 5%, largely due to decisive government policies. The recovery, which began in late 2023, was supported by a rebound in exports and tourism, alongside expansionary fiscal and monetary policies. Inflation picked up in 2024, mainly due to higher food prices, though core inflation remained relatively low and stable. “The external current account posted a large surplus in 2023, at 5.8% of GDP, mainly reflecting a significant contraction in imports,” the report said. The IMF’s forecast for 2024 growth is supported by continued strong external demand, stable foreign direct investment, and accommodative government policies. Domestic demand is expected to recover gradually, although businesses continue to grapple with high debt levels, and the real estate market is unlikely to fully recover until the medium term. Inflation is projected to remain within the State Bank of Vietnam's target range of 4%-4.5%. The IMF also highlighted several risks to Vietnam’s economic outlook. Exports, a key growth driver, could weaken if global growth falters, geopolitical tensions persist, or trade disputes escalate. Additionally, prolonged pressure on the exchange rate could exacerbate domestic inflation.

Weaknesses in the real estate and corporate bond markets may also have a stronger-than-expected impact on banks’ ability to extend credit, undermining economic growth and financial stability.

Enhancing bank supervision

The IMF commended Vietnam’s swift actions to maintain macroeconomic stability during the post-COVID-19 pandemic recovery, despite facing significant domestic and international challenges. However, the IMF stressed that risks remain high and further efforts are needed to ensure long-term stability, address vulnerabilities, and promote green, strong, and inclusive growth. The IMF recommended prioritising fiscal policy to support production and economic recovery, given the limited space for further monetary easing. It welcomed plans to accelerate public investment but emphasized the need to address bottlenecks and expand the social safety net for vulnerable groups. While the IMF praised Vietnam’s management of inflation risks, it advised caution in monetary policy, noting the limited policy space and complex environment. The IMF also supported progress toward a more flexible exchange rate and modernization of the monetary policy framework. To enhance the resilience of the financial system, the IMF recommended reinforcing capital buffers, addressing the growing volume of non-performing loans, and phasing out debt extension regulations while maintaining debt classification. It also urged further strengthening of banking supervision and management.

Additionally, the IMF called for improvements to the legal framework for managing banking crises and emergency liquidity provisions. The IMF welcomed recent amendments to the Law on Credit Institutions and recommended continued efforts to strengthen banking supervision. The IMF also noted Vietnam's quick response in mitigating risks in the real estate and corporate bond markets./.