Robust economic growth in both quantity and uaqlity

According to Mr. Tran Quoc Phuong, Deputy Minister of Planning and Investment (MPI), with Vietnam’s economic growth reaching 6.42% in the first half of 2024, the annual growth target of 6-6.5% is entirely feasible.

Signs of Recovery

Mr. Tran Quoc Phuong also stated that, according to this scenario, the third and fourth quarters would grow by approximately 7.4-7.6%. Although a growth rate above 7% is high, it is entirely within our reach, given the efforts to overcome the limitations mentioned in the government report. Based on this calculation, MPI has reported to the government a new scenario option, with annual growth of around 6.5-7%. In which, the Ministry recommends that the government set a higher target of over 7% to have more decisive directions towards this goal.

In the context of both domestic and global economies recovering but still facing many difficulties, Mr. Nguyen Duc Hien, Deputy Head of the Central Economic Commission, commented that the Vietnamese economy has shown bright spots as reflected in the GDP growth rate in the first and second quarters of 2024, which tended to increase from 5.87% to 6.93%, with an average of 6.42% for the first six months of 2024. Related indicators have also achieved good results, such as: total social investment, public investment, private investment all increased, FDI increased by 8.4% compared to the same period last year. Domestic consumption is stable, with total retail sales of goods and services increasing by about 8.7%.

Sharing the same view, Ms. Tran Thi Hong Minh, Director of the Central Institute for Economic Management (CIEM), also said that Vietnam’s economy in the first seven months of 2024 has achieved very encouraging results. First, one of the events related to international integration that affected the world economy, the region as well as Vietnam in the first half of 2024, was the United Kingdom joining the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership). In addition, the upgraded Free Trade Agreements (FTAs) within ASEAN had a very positive impact on Vietnam’s economy in the first half of 2024.

Domestically, the government is very determined to issue solutions to promote reform and institutions to create a more favorable business environment. Accordingly, recently, the Prime Minister has signed Decision No. 603/QD-TTg on the establishment of a Steering Committee to review and handle difficulties in the system of legal documents. Some important laws have also been implemented early (Land Law 2024, Housing Law 2023, Real Estate Business Law 2023, Law on Credit Institutions 2024), also showing the government’s determination to reform the institution, making the institution a resource to create a foundation to support business activities and facilitate government operations.

One of the next bright spots is that the components of aggregate demand have recovered relatively positively, and inflation is under control (in the first seven months, average CPI increased by 4.12% compared to the same period in 2023). Regarding FDI attraction, the Director of CIEM also affirmed that, in the context of FDI attraction in other countries declining, Vietnam still achieved positive figures with great significance. “The foreign investor community still evaluates the investment environment in Vietnam quite positively. According to information released by the Japan External Trade Organization (JETRO) in May 2024, Vietnam still ranks second in the list of investment destinations for Japanese businesses wanting to expand their operations,” emphasized the Director of CIEM.

Implementing and Enforcing FTAs

According to experts, it is forecast that in the coming time, the world economy will still have potential risks and unpredictable fluctuations that could negatively affect the prospects for economic growth recovery in Vietnam. Meanwhile, 2024 is the penultimate year of the 2021-2025 socio-economic development plan, if the growth target of 6 to 6.5% is not achieved this year, the target of the 2021-2025 five-year plan will become an impossible task.

In this context, in order to achieve the set growth target, it is necessary to consolidate and maximize the growth drivers to expand the development space for the economy. As one of the growth drivers of the “three horses” (including investment, exports, and consumption), according to Mr. Trinh Minh Anh, Head of the Office, Inter-agency Steering Committee for International Economic Integration (Ministry of Industry and Trade), expanding international trade and exports has a great impact on the Vietnamese economy, GDP growth, and foreign investment. Vietnam currently has diplomatic relations with 193 countries, is an active member of 70 regional and international organizations.

Vietnam is also one of the 40 largest economies in the world in terms of GDP, one of the 20 largest economies in the world in terms of trade volume. Notably, Vietnam is the leading country among the top 15 economies in the world in attracting FDI; in the top 46 countries in the world in terms of Innovation Index.

“In the coming time, there are many signs that Vietnam’s growth rate is very promising. This result is due to Vietnam’s increasingly expanded international economic integration in both breadth and depth. Accordingly, we not only sign the most FTAs but also FTAs of high quality. Of the 16 signed FTAs, 15 FTAs have come into effect, including both bilateral and multilateral. Thus, we have relations with 60 countries and territories on almost all continents (except Africa), accounting for up to 90% of global GDP. This makes Vietnam a very important link in global trade,” Mr. Trinh Minh Anh added.

However, besides the opportunities that FTAs bring to exports from removing tariff barriers, according to Mr. Trinh Minh Anh, participating in global supply chains also poses many challenges for Vietnam. That is the increasingly fierce competition in the international market, the need to meet high-quality standard commitments as well as production speed and scale, technical barriers (food safety and hygiene) and environmental regulations – green production…

But Mr. Trinh Minh Anh also believes that Vietnam has more opportunities than challenges. Challenges can be limited by making efforts to meet the requirements of the global market. The government continues to build and improve the early warning mechanism to prevent disputes. Regularly check and supervise the implementation and enforcement of effective FTAs on the basis of maximizing internal strength, closely linking and promoting the process of perfecting the institutional system, improving the quality of human resources…

In addition, to take advantage of the advantages that FTAs bring, enterprises must always update new information, guide, and train employees to access and take full advantage of FTAs. According to Mr. Pham Quang Vinh, former Deputy Minister of Foreign Affairs, Vietnam is in a favorable position and can take advantage of investment flows in the context of ongoing investment shifts.

To take advantage of these investment flows, Vietnam needs to pay attention to a number of issues, namely choosing the most favorable partners and aiming to attract capital to improve the quality of the economy’s growth. At the same time, Vietnam also needs effective policies to proactively control the risk of having too many factories shifting to Vietnam, leading to overproduction, causing concerns about manipulating the markets of other countries. For example, recently, Indonesia has imposed high taxes on some Chinese goods due to concerns that these goods will flood the domestic market.