Forecast of Vietnam’s Economic Trends in 2023│A Review of 2022

Introduction

This report provides a review of Vietnam’s economy in 2022 based on the 10 major economic topics for 2022 and a comprehensive forecast of trends in 2023 along with various forecast figures.

Vietnam Economy 2022 in Review: 10 Major Topics

In 2022, the Vietnamese economy had the following 10 major events.

• General Secretary Nguyen Phu Trong visits China
• Recovery, GDP growth, inflation under control
• Continued trade surplus
• Attracting foreign investors
• Struggling real estate market
• Summary of 18th resolution
• VN Index surpasses 1000 points
• Fraud in the new coronavirus disaster
• Sluggish bond market
• Full border opening and SEA Games 31

Following is a brief description of each topic.

General Secretary Nguyen Phu Trong Visits China

General Secretary Nguyen Phu Trong visited China from October 30 to November 1, 2022. This is his first foreign visit after the 13th National Congress of the Communist Party of Vietnam and his first guest in China after the 20th National Congress of the Communist Party of China.

Recovery, GDP Growth, Inflation Control

GDP will increase by 8.02% in 2022, setting a record for the first time in over a decade; the consumer price index (CPI) will be 3.15% in 2022 (below the 4% assigned by the National Assembly) and inflation will be controlled at 2.59%; GDP per capita in 2022 will be 95.6 million VND/person or 4,110 USD, which is expected to reach USD 393, an increase of USD 393 over 2021.

Continuing trade surplus

Vietnam’s imports and exports in 2022 continued to set new records with a total volume of $732.5 billion handled, up about 10% from 2021. Among them, exports reached $371.85 billion, up 10.6%. The trade balance was a surplus of $11.2 billion, maintaining a trade surplus for the seventh consecutive year.

Attracting foreign investors

224 new FDI projects were created in December, bringing the total number of projects in 2022 to 2,036 and the total annual FDI to $27.72 billion.

The real estate market struggles

In 2022, the real estate market faced many challenges, with most projects halted by legal restrictions. Bond and stock markets were controlled, credit was tightened, transactions stagnated, loan rates and foreign currency rates all increased, and investors’ earnings and cash flows were greatly reduced.

Summary of the 18th Resolution

General Secretary Nguyen Phu Trong signed and promulgated Resolution No. 18-NQ/TW on the management and use of land, which is of interest to many citizens. This resolution stipulates the mechanisms and methods of determining land prices according to market principles, as well as the functions, duties, and responsibilities of the bodies that determine land prices.

VN Index Surpasses 1,000 Points

In 2021, the stock market grew by leaps and bounds, reaching all-time highs; in 2022, many factors point to a strong downward correction in the market. This was due, among other things, to the process of raising interest rates globally to curb inflation, which put pressure on domestic interest rates.

Injustice in the new coronavirus disaster

Taking advantage of the social turmoil caused by the pandemic of the new coronavirus, corrupt criminals took advantage of the opportunity to commit particularly serious fraud. Incidents of bribery and systematic corruption occurred.

Bond market slump

Corporate bond issuance fell by more than 60% year-on-year. The banking group remains stable in terms of issuance, while the real estate group is virtually unchanged.

Complete Opening of Borders and SEA Games 31

Domestic tourism has rebounded strongly with the complete lifting of entry restrictions due to the new coronavirus and the success of the 31st SEA Games, the SEA Games are the Southeast Asian Games, a sports festival also known as the “Southeast Asian version of the Olympics.

The number of domestic tourists is expected to recover strongly in 2022, reaching 101.3 million, 1.5 times the target set at the beginning of the year.

Vietnam Economy 2023 Forecast

Many predictions have been made regarding Vietnam’s economic growth in 2023.

According to the Macroeconomic Report 2023, Dragon Viet Securities stated that Vietnam’s economic growth will definitely decline in 2023. This is due to poor export prospects, which will adversely affect growth in industrial production, investment, and domestic consumption. The downward cycle in real estate will adversely affect growth. The real estate sector accounts for about 3.7% of GDP (2022). The sectors most directly related to real estate include construction (6.6% of GDP) and finance and banking (5.4% of GDP).

Under the base scenario, VDSC projects GDP growth of 5.6% in 2023, below the government target of 6.5% and the current overall forecast of 6.2% The pessimistic and optimistic scenarios for GDP growth in 2023 are 5.1% to 6.0%.

MBS Securities also said that between 2020 and 2023, the economy was greatly affected by the new coronavirus epidemic and growth declined significantly; in 2023, Vietnam is projected to grow steadily, but slow to 6% as the global economy enters a recession when inflation and interest rates are high.

On the other hand, contrary to the above brokerage firms’ forecasts, the research and analysis department of FIDT Corporation said Vietnam’s economic growth is expected to fluctuate between 5.8-7.2%, higher than the approved targets in most regions.

Huynh Minh Tuan, director of the FIDT, however, said the economic outlook differs between the first six months of the year and the end of the year.

First, until at least 6 years 2023, the Fed and ECB will maintain tight monetary policy to keep inflation in check. In the future, this will raise interest rates, reduce consumer demand, affect the labor market, and limit economic development in the US and Europe. Vietnam’s exports will be affected by reduced demand in these regions.

VnDirect Securities also believes that the economic growth impulse will slow in 2023. Vietnam will face challenges in 2023 due to low export growth, a high interest rate environment, global inflation remaining at warning levels, tight liquidity, and increasing non-performing loan pressure in the real estate sector.

However, VnDirect Securities forecasts that GDP will increase by 6.7% in 2023, higher than the government’s target of 6.5%.

In the Vietnam Economic Growth Report Q2023-3 and Outlook 1, conducted by the Global Economics & Markets Research department of UOB Bank (Singapore) and released on April 2022, UOB maintained its forecast for Vietnam’s GDP growth in 2023 at maintained at 6.6%, consistent with the official forecast of 6.5%.

The World Bank (WB) forecasts economic growth at 6.7%, an optimistic outlook compared to the somewhat bleak outlook for the rest of the economy.

Chang Thi Hong Minh, director of the Central Institute for Economic Management, said, “The very serious implementation of the Prime Minister’s directive will actually be realized and reflected in the statistics as 2022 comes to an end, with GDP growth at 8.02% and inflation at 3.15%.

“In particular, there is a clear recovery in areas such as the entry of businesses and their return to the market, issues related to the growth of imports and exports, issues related to the promotion of the recovery of the tourism industry, or the opening of better opportunities for foreign investors.” He stated.

The recently released Central Institute for Economic Management report, “Vietnam’s Economy in 2022, Outlook for 2023,” presents 2023 scenarios of Vietnam’s economic growth over two years. Specifically, under the first scenario, GDP growth would reach 6.47%, with an average inflation rate of 4.08%, export growth of 7.21%, and a trade balance of $564 million, while the sixth scenario would increase GDP growth by 8.3%. These growth rates are considerably higher than the global average growth rate projections.

As mentioned above, some brokerage firms predict that Vietnam’s economy will face more difficulties in 2023, while other institutions predict that Vietnam’s economy will grow dramatically. Thus, there are various predictions regarding Vietnam’s economic growth in 2023.

Finally

This report provides a review of the Vietnamese economy based on the 10 major economic topics for 2022 and a comprehensive forecast of trends for 2023. Various predictions have been made regarding trends in the Vietnamese economy, and it is necessary to continue to gather information and pay attention to trends in the future.

We hope that Japanese companies considering expansion into Vietnam will contact ONE-VALUE, a consulting firm specializing in Vietnamese market entry.

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