Vietnam economy shows strength as exports stage recovery

Vietnam’s economy fared better than expected in 2023, in signs it will improve from here as consumer demand returns, exports recover and investments surge.

Gross domestic product rose 5.05% from a year earlier after increasing an initial 8.02% in the previous year. The median estimate in a Bloomberg survey of economists was for 4.7% full-year growth, while the government had estimated growth at 5%. The economy expanded 6.72% in the final quarter.

Vietnam, where value of exports is almost the same size as the country’s GDP, is recovering from a global demand downturn caused by restrictive interest rates.

The benchmark VN Index rose as much as 0.5% to the highest level since Oct. 17.

Fourth-quarter growth “suggests that the economy has picked up momentum and is a good sign going into 2024,” said Ruchir Desai, a co-fund manager at AFC Asia Frontier Fund.

A GDP growth of 6-6.5% in 2024 for Vietnam will be a good platform to see a strong recovery in earnings in 2024. However, we would still need to watch exports growth going forward.”

Anemic exports for most of the year, coupled with hiccups in the property sector, reduced what was among Asia’s fastest growing economies to a middle-of-the-pack performer this year. However, no one is writing it off in the long run. A credit-rating upgrade from Fitch Ratings this month showed Vietnam’s medium-term growth potential is intact.

The economy is expected to return to 6% growth next year, and vie for the best-in-Asia growth tag by 2025, a Bloomberg survey shows. 

Vietnam, a member of several multilateral trade pacts, is poised to benefit from bilateral agreements this year with China, its top commerce partner, and a bump in ties with the US, its largest export market. 

Exports notched their first quarterly growth in five quarters, while strong retail sales in the fourth quarter showed domestic consumer demand is returning.

Consumer prices rose 3.58% from a year ago in December, slower than the 3.80% gains seen by economists surveyed by Bloomberg. Credit growth in Vietnam’s banking system climbed 11.09% through Dec. 21 compared to end-2022.

That is heartening news for Vietnam’s government, which has ramped up its push to bolster the economy. Prime Minister Pham Minh Chinh has urged banks in recent months to be more flexible in lending.

He’s also nudged ministries and provincial governments to speed up disbursement of public investment as part of a goal to return GDP growth to 6% to 6.5% in 2024.