HANOI : Vietnam faces a tough balancing act between hitting its annual growth target and maintaining stability in its markets, its government and central bank said on Monday, as slowing global demand dims prospects in the regional manufacturing hub.
Declining exports, rising inventory levels, inflation and slow foreign direct investment are among the challenges the country is facing, the planning and investment ministry said, as it forecast GDP growth at 6.0 per cent to 6.5 per cent for the year.
“The adverse global conditions have affected domestic growth and business activities, especially industrial production and exports,” the ministry said in a statement, adding the difficulties may last until the end of the second quarter.
Vietnam reported growth of 3.32 per cent in the first quarter of the year, slowing from 5.92 per cent in the fourth quarter of 2022.
Exports dropped 11.9 per cent from a year earlier, notably of seafood, which fell by a third, while orders for its garment products fell 15 per cent to 20 per cent.
The central bank on Monday said it was facing significant pressure to support growth while keeping the banking system and foreign exchange markets stable, after having cut its refinance rate by 50 basis points for the second time in two weeks.
The State Bank of Vietnam also said it bought $4 billion worth of U.S. dollars from the market in the first quarter, in a move it described as “pumping (the dong currency) to the system to have abundant liquidity”.
Capital Economics said it expected the central bank to cut rates even further given the weakness of recent data.
“With global growth set to remain weak in the coming quarters, we think Vietnam’s economy will remain under pressure,” it said, adding it expected GDP growth to slow to 5.0 per cent in 2023 from 8.0 per cent in 2022.
The planning ministry proposed “sticking to the growth target of 6.5 per cent for this year to create momentum for annual growth of 6.5 per cent-7.0 per cent for the 2021-2025 period.”