Vietnam’s Economy Poised for 6.1% Growth in 2024, World Bank’s “Talking Stock” Report Forecasts

Vietnam’s economy is projected to accelerate in 2024, buoyed by a resurgence in manufactured exports, a revival in tourism, and strengthening domestic consumption and business investment, according to a new report from the World Bank.

The World Bank’s “Talking Stock” report forecasts that Vietnam’s economy will grow by 6.1% in 2024, with further growth of 6.5% in both 2025 and 2026, up from 5% last year. Despite this positive outlook, the report, titled “Reaching New Heights in Capital Markets,” cautions that Vietnam’s economy has yet to return to its pre-pandemic growth trajectory.

A key area of concern highlighted in the report is the quality of bank assets, as rising non-performing loans (NPLs) could pose risks that require careful monitoring.

Sebastian Eckardt, World Bank East Asia and Pacific Practice Manager for Macroeconomics, Trade, and Investment, noted that Vietnam benefited from a rebound in export demand during the first half of the year. Meanwhile, Dorsati Madani, Senior Country Economist at the World Bank in Vietnam, described the country’s economic outlook as positive but warned of balanced risks.

Madani pointed out that slower-than-expected global growth, particularly in major trading partners like the US, EU, and China, could present significant downside risks. Domestically, any weakening of macroeconomic stability could dampen consumer confidence, impacting both consumption and investment. Additionally, a slower-than-anticipated recovery in the real estate market could further hamper private-sector investment. If the financial sector’s asset quality deteriorates, it could weaken bank lending capacity, posing further risks to growth.

Intensifying climate-related natural disasters could also add to these challenges, while more accommodative monetary policies in advanced economies might boost demand and support Vietnam’s exports. Madani emphasized the importance of accelerating public investment disbursement to promote economic growth.

In the financial sector, improving banks’ capital adequacy ratios and accelerating capital market reforms are crucial, according to the report. The development of Vietnam’s capital markets is seen as vital for providing long-term funding that could help the country achieve its goal of becoming a high-income nation by 2045.

Madani also highlighted the need for structural reforms, including improving the legal framework in sectors like information technology, communications, power, and transport to enhance infrastructure for future development. She stressed the importance of deepening international integration and strengthening Vietnam’s participation in the global value chain, alongside upgrading the labor market.

Ketut Kusuma, the World Bank’s Senior Financial Sector Specialist, noted that Vietnam’s capital markets have made significant strides over the past decade, supported by strong macroeconomic fundamentals. However, these markets remain in a nascent stage. Despite Vietnam’s capital markets reaching over 90% of GDP in 2023, fundraising activities, particularly in the stock market, are limited. Most listings have been introductions to trade rather than initial public offerings (IPOs) or major fundraising efforts.

While the bond market is more significant, with VNĐ271 trillion in government bonds and VNĐ403 trillion in corporate bonds issued annually, the rapid growth in corporate bonds has introduced new risks. The total savings mobilized through institutional investors remains low at just 19% of GDP, which is smaller than in most regional peers, limiting the funds available for long-term investments.

Additionally, the report highlighted that Vietnam’s capital markets have yet to establish strong price references due to unclear short-term interest benchmarks, inefficiencies in the government bond market, and high volatility in stock prices.

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