Vietnamese economy recovers rapidly thanks to drastic actions: IMF expert

IMF's expert attributed high GDP growth in Q2 to thriving exports and actions taken by the government and the State Bank of Việt Nam (SBV) such as reducing interest rates and increasing public investment and wages. — VNA/VNS Photo Tuấn Anh

WASHINGTON D.C. — Việt Nam's economy recovered rapidly in the first half of 2024 after a challenging period at the end of 2022 and early 2023, thanks to its government’s drastic actions, according to Paulo Medas, head of the International Monetary Fund (IMF)’s 2024 Article IV Mission to Việt Nam.

The IMF team, led by Paulo Medas, held the 2024 Article IV consultation with Việt Nam from June 12-26.

In a recent interview granted to the Việt Nam News Agency in Washington D.C., the official said that Việt Nam’s economy rebounded and grew by 6.4 per cent year-on-year in the first half. He attributed this to thriving exports and actions taken by the government and the State Bank of Việt Nam (SBV) such as reducing interest rates and increasing public investment and wages.

Regarding prospects for the second half, the expert forecast the Vietnamese economy will continue to recover, but at a slower pace, and may expand by over 6 per cent for the whole year.

The country’s inflation has gone up, and reached around 4.3 per cent year-on-year in June, he stated, predicting it's likely to stay around, close to the SBV target of 4.5 per cent.

The expert also pointed out several latent risks, including the currency depreciation and public wage rise that require the central bank to monitor closely and to take measures to regulate.

To help the country overcome the challenges, he recommended Việt Nam to balance economic recovery and inflation risk management.

The State Bank must keep a close watch on the situation and be ready to take actions in case inflation rises sharply, he stressed.

According to Medas, Việt Nam needs to pay more attention to medium-term economic growth. The IMF is conducting an in-depth study on what could happen to medium-term growth in Việt Nam. In the past 15-20 years, Việt Nam's economic performance has been really strong, with the growth higher than the average of emerging markets around the world.

He went on to say that the aging population and climate change are major factors that will impact Việt Nam’s economic growth in the future.

Regarding productivity, the IMF expert said that the Southeast Asian country’s productivity growth continues to be lower than other countries around the world. So reforms that can push productivity up can compensate for the demographic issue in the future.

He stressed the need for continued efforts to improve the business environment, upgrade infrastructure, including on energy and renewables, accelerate reforms related to climate, and have good capital markets.