Vietnam’s 2023 GDP growth slows to 5.05%; trade surplus hits new record
Jamille Tran
[HO CHI MINH CITY] Vietnam’s economic growth slowed to 5.05 per cent in 2023 on weak external demand. The figure came in lower than the government’s official target of 6.5 per cent, and well below last year’s 8.02 per cent expansion.
In what was the fourth straight month of expansion, Vietnam’s December exports ended on a good note, with year-on-year growth at a 10-month high of 13.1 per cent. This helped to fuel fourth-quarter GDP growth to 6.72 per cent, marking the highest quarterly expansion in the past year.
After the country’s exports decreased by 8.5 per cent in the first three quarters of 2023, the full-year figure ended up at a decline of 4.4 per cent, to US$355.5 billion.
The major export category of computers and electronics saw moderate full-year growth of 3.3 per cent. Another major category – smartphones and components – surged by 51.5 per cent in December, but fell by 8.3 per cent for the entire year.
“Exports figures in the last few months of 2023 herald a new cycle of heightening demand for electronic products in 2024,” said Pham Vu Thang Long, the chief economist of Ho Chi Minh City Securities Corporation (HSC). “This will be one of the main drivers for Vietnam’s recovery next year, as computers and smartphones account for about one-third of total exports.”
Full-year imports contracted by 8.9 per cent from a year earlier, to US$327.5 billion. Overall, Vietnam’s trade surplus for 2023 reached a record high of US$28 billion, more than double last year’s US$12.1 billion.
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Industrial production in December increased 5.8 per cent year on year (yoy). Overall, industrial production was up 1.5 per cent in 2023.
The largest contributor to Vietnam’s full-year economic growth was the services sector, which increased 6.82 per cent, thanks to the high growth momentum seen in the commercial and tourism sectors, said the GSO.
The number of international visitors totalled 12.6 million over the past 12 months, surpassing the official goal of eight million, but still only about 70 per cent of pre-pandemic levels.
In November, Vietnam’s legislature approved several economic targets for 2024, including the GDP growth rate of 6 to 6.5 per cent and inflation of 4 to 4.5 per cent.
Weak recovery
The S&P Global’s purchasing managers’ survey for Vietnam revealed a third straight month of deterioration in factory activities in November, due to waning demands both in domestic and international markets.
“The (manufacturing) sector therefore looks set to head into 2024 in pretty subdued fashion, hoping for a pickup in demand conditions to occur soon,” said Andrew Harker, an economics director at S&P Global Market Intelligence.
Credit growth as at end-November stood at 8.2 per cent, according to data from the State Bank of Vietnam, which earlier set the full-year target at 14 per cent. The central bank attributed this to a slow economic recovery, which led to weak demand for loans.
In a Dec 11 report, Maybank economists said they expect Vietnam’s recovery in 2024 to be driven by green shoots in exports and manufacturing.
However, the real estate sector, activities of which account for 12 per cent of GDP, “will remain a drag on domestic demand”, they said.
The sector – plagued with bond-refinancing pressures, a sluggish property market and high debt burdens over the past year – might have already overcome the worst period, the economists added. The outlook in turn could be brightened up in the second half of 2024, thanks to increasing demand from homebuyers due to lower lending rates and the economic recovery.
Retail sales in December grew 9.3 per cent yoy, but the full-year rate of 9.6 per cent is markedly lower than the 20 per cent rate in 2022.
Investment outlook
In 2023, investment capital realised from the state Budget was estimated at 625.3 trillion dong (S$33.9 billion). This is 85.3 per cent of the planned full-year figure, and up 21.2 per cent from the same period last year.
The highlight was on disbursed foreign direct investment (FDI), which as at Dec 20 had increased to a record high of US$23.18 billion, up 3.5 per cent from a year earlier. Registered capital also grew 32.1 per cent from the year-ago period, estimated at US$36.6 billion.
However, analysts said this trend might cool down in the year to come, following Vietnam’s roll-out of the 15 per cent global minimum tax rule from January 2024. Besides, firms will remain concerned about Vietnam’s infrastructure woes, including an overloaded electricity transmission grid and limited access to renewable energy.
“Despite those factors, based on the strong momentum of FDI over the past year, we see that foreign investors are still betting on Vietnam’s long-term growth outlook. The shifts of the manufacturing supply chain to Vietnam will remain robust in the upcoming years,” said HSC’s Long.
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