Vietnam’s economic shine starting to fade

Vietnam’s 2023 growth underperforms as exports sag and concerns rise about unreliable power supplies and skilled labor shortages

After two frustrating years of Covid-induced economic slowdown, Vietnam bounced back in 2022 with a strong performance — its GDP grew more than 8%. 

In 2023, the government hoped that a stronger Chinese and global economy would allow a continuation of export-led growth, including growth in tourism and related services. Projections, or hopes, were for 6% to 7% GDP growth.

But both the world and China proved to have less demand for Vietnam’s exports than hoped. Now even Vietnam’s prime minister is suggesting growth of “around 5%”, which is close to the 4.7% estimated for 2023 by the International Monetary Fund. Exports fell 5.7% in the first 11 months of 2023. For an economy where exports nearly equal GDP, this creates a major growth problem.

Through November 2023, tourism revenue increased 50%, but this was not enough to offset the weakness in industrial output growth, which was only 1%. 

While external factors significantly contribute to slower growth, the problems with electricity supply also contributed to the slow growth in foreign direct investment (FDI) realizations. These realizations only grew 2.9% in dollar terms, probably a slight shrinkage in real terms.

The government did several things right. 

By David Dapice – Asia Times – December 18, 2023