Vietnam: Positive prospects in 2023

Vietnam’s economy is expected to have positive prospects in 2023 after witnessing stability in late 2022 with bright macroeconomic indicators amid the world’s difficulties.

The Vietnamese financial market has witnessed positive changes in the last couple of weeks with exchange rate problems settled almost completely and inflation kept at a low rate. The corporate bond market also is expected to develop more strongly in the future.

In the last two weeks of November and in early December, 2022, dollar prices decreased rapidly. The greenback depreciated by 4.8 percent from the peak of VND24,888 per dollar on October 25 (Vietcombank) to VND23,700 on December 15.

“The situation has turned around. The exchange rate situation is no longer tense. The interest rate increase, if it occurs at this time, won’t cause worries,” a financial expert said.

Once the dong appreciates, international capital flow will reverse and it will flow strongly into Vietnam.

On December 16, 2022, for the first time in the last 3.5 months, the State Bank of Vietnam (SBV) once again quoted the buy price of VND23,450 per dollar.

Tran Thi Khanh Hien from VNDirect Securities predicted that Vietnam’s forex reserves may improve in 2023, from VD89 billion now to $102 billion by the end of the year.

SBV sold a huge number of foreign currencies to stabilize the exchange rate in October 2022.

In 2023, Hien hopes the trade surplus would reach $12 billion, higher than the $10.4 billion in 2022.

According to the World Bank (WB), the inflation rate in Vietnam is increasing, but it is still low. The CPI in November rose by 4.37 percent compared with the same period last year.

With the stable macroeconomic condition, on November 5, SBV raised the credit growth rate limit by 1.5-2 percent, which means that VND240 trillion worth of capital may be pumped into the national economy. 

The money will improve liquidity, and help enterprises get more working capital from now to the end of the year and early 2023.

In the eyes of many experts, the sharp depreciation of the dollar and the SBV’s purchase of dollars are both good signs, showing that Vietnam is coming back to the period of “pumping capital” to ensure economic growth.

Thai Thi Viet Trinh from SSI Research said that SBV’s lifting the credit limit will provide more resources to enterprises needed in the last months of the year. 

The capital is expected to be poured into production and business, especially priority business fields such as agriculture and rural development, exports, small and medium enterprises (SMEs) and supporting industries.

The move shows the central bank’s flexible policy to settle the problem of liquidity after seeing signs of decreasing exchange rates and stable inflation rate.

2023 growth

On December 14, the Asian Development Bank (ADB) commented that Vietnam’s economy is running well amid global uncertainties. ADB has raised its prediction about Vietnam’s GDP growth rate to 7.5 percent in 2022 from 6.7 percent, while it has lowered the predicted inflation rate to 3.5 percent.

As for 2023, ADB predicted a growth rate of 6.3 percent because of the weakening of large trade partners such as Europe. The predicted level is higher than the level given by the organization last April. 

Albert Park, chief economist of ADB, commented that Asia and Pacific will continue to recover, but global conditions are worsening.

He said the challenges for Vietnam are decreasing, and the US FED’s reductions in lowering interest rates are also good for Vietnam. 

The World Bank said that the weaker dollar would help ease pressure on the exchange rate.

Earlier, Pemba Tshering Sherpa of the International Monetary Fund (IMF) said Vietnam would have to face a challenging environment in 2023, but still predicted that Vietnam’s economic growth rate would be 5.8 percent.

Ramla Khalidi from UNDP Vietnam said Vietnam’s economic prospects are bright, but risks are increasing. In optimistic scenario, economic growth may reach 6.5-6.7 percent. In another scenario, it would be 6-6.2 percent

Vietnam has set major goals for 2023 as follows: GDP growth rate of 6.5 percent, per capita GDP $4,400, the processing and manufacturing industry to account for 25.4-25.8 percent of GDP, CPI to increase by 4.5 percent.

Duy Anh