Finance minister says Vietnam must take ‘aggressive’ action to meet development goals

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Vietnam needs to take aggressive steps to reach its economic targets this year, the country’s finance minister has warned as the export-driven manufacturing hub struggles to maintain strong growth amid a sharp drop in orders.

Vietnam was one of Asia’s fastest-growing economies last year, expanding by more than 8 percent, its highest growth rate since 1997. But growth has slowed to 3.3 per cent in the first quarter of 2023 from 5.9 per cent in the fourth quarter. Last year, the grim global economic picture and high inflation led to a reduction in demand for the country’s exports.

“We rely on world demand for our products, which is facing many difficulties,” Ho Duc Phuc told the Financial Times. He said the war in Ukraine has increased petroleum and consumer prices, putting pressure on manufacturing inputs and business costs. Desperate appetite of buyers. “Our orders from international partners have dropped significantly.”

Phuc said the government is targeting growth of 6 to 6.5 percent for the full year, following an estimated growth of about 4 percent in the first half.

“In the next six months, we will probably have to take aggressive steps to achieve that target,” he said, citing an extension of the deadline for tax payments, a cut in value-added tax and petrol levy among proposals to help lower costs. Where did you go? and boost demand.

Vietnam’s central bank cut interest rates by 50 basis points this month, its fourth cut this year.

You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.

Vietnam’s export-led growth has lifted millions of people out of poverty over the past 30 years, making the Southeast Asian country one of the world’s poorest. Lower middle income status.

The reform policies introduced in the late 1980s are called doi moior “renovation”, dismantled the central economic plan, turned the one-party communist state into a manufacturing powerhouse after decades of deprivation and war.

Vietnam is also emerging as a beneficiary of the “friendshoring” campaign, as companies seek to protect their supply chains from geopolitical tensions between Washington and Beijing due to its proximity to the region and lower labor costs. Phuc said that Vietnam’s “convenient” business environment was also a big draw for the business, as well as its “abundant” and cheap labor force.

“Our investors mainly come from South Korea, Japan and Singapore,” he said. “We believe more investors will come from the EU, Germany, India, the US, the UK and even China,” which remains Vietnam’s biggest trading partner.

Companies including Samsung and Foxconn have relocated to Vietnam or increased operations there in recent years, a shift accelerated by China’s stringent zero-Covid regime, which has disrupted global trade.

But Vietnam’s infrastructure, which developed rapidly to meet demand from offshore manufacturers, is increasingly under pressure. Extreme heat and scant rainfall have contributed to power cuts in the northern part of the country in recent weeks.

“Power cuts are affecting many business activities, especially some industrial sectors,” the minister said, pledging new investments in coal and hydropower-dependent electricity grids as well as highways, ports and airports. Phuc said at least 700 billion dong ($30 million) was set aside annually for infrastructure investment.

In March, the National Assembly appointed Vo Van Thuong as the country’s second-in-command after the resignation of her predecessor. The reshuffle comes amid a years-long anti-corruption campaign that has allowed Communist Party chief Nguyen Phu Trong to consolidate his hold on power by eliminating potential rivals.

Business lobby groups and investors said decision-making had stalled in the wake of the anti-corruption crackdown.

Fuchs dismissed suggestions that the reshuffle would have an effect on the economy. “The aim of cracking down on corruption is to make the economy healthy and transparent,” he said.

GET FREE VIETNAM UPDATES

we will send you one myFT Daily Digest Latest Email Rounding Vietnam News every morning.

Vietnam needs to take aggressive steps to reach its economic targets this year, the country’s finance minister has warned as the export-driven manufacturing hub struggles to maintain strong growth amid a sharp drop in orders.

Vietnam was one of Asia’s fastest-growing economies last year, expanding by more than 8 percent, its highest growth rate since 1997. But growth has slowed to 3.3 per cent in the first quarter of 2023 from 5.9 per cent in the fourth quarter. Last year, the grim global economic picture and high inflation led to a reduction in demand for the country’s exports.

“We rely on world demand for our products, which is facing many difficulties,” Ho Duc Phuc told the Financial Times. He said the war in Ukraine has increased petroleum and consumer prices, putting pressure on manufacturing inputs and business costs. Desperate appetite of buyers. “Our orders from international partners have dropped significantly.”

Phuc said the government is targeting growth of 6 to 6.5 percent for the full year, following an estimated growth of about 4 percent in the first half.

“In the next six months, we will probably have to take aggressive steps to achieve that target,” he said, citing an extension of the deadline for tax payments, a cut in value-added tax and petrol levy among proposals to help lower costs. Where did you go? and boost demand.

Vietnam’s central bank cut interest rates by 50 basis points this month, its fourth cut this year.

You are viewing a snapshot of an interactive graphic. This is probably due to being offline or JavaScript is disabled in your browser.

Vietnam’s export-led growth has lifted millions of people out of poverty over the past 30 years, making the Southeast Asian country one of the world’s poorest. Lower middle income status.

The reform policies introduced in the late 1980s are called doi moior “renovation”, dismantled the central economic plan, turned the one-party communist state into a manufacturing powerhouse after decades of deprivation and war.

Vietnam is also emerging as a beneficiary of the “friendshoring” campaign, as companies seek to protect their supply chains from geopolitical tensions between Washington and Beijing due to its proximity to the region and lower labor costs. Phuc said that Vietnam’s “convenient” business environment was also a big draw for the business, as well as its “abundant” and cheap labor force.

“Our investors mainly come from South Korea, Japan and Singapore,” he said. “We believe more investors will come from the EU, Germany, India, the US, the UK and even China,” which remains Vietnam’s biggest trading partner.

Companies including Samsung and Foxconn have relocated to Vietnam or increased operations there in recent years, a shift accelerated by China’s stringent zero-Covid regime, which has disrupted global trade.

But Vietnam’s infrastructure, which developed rapidly to meet demand from offshore manufacturers, is increasingly under pressure. Extreme heat and scant rainfall have contributed to power cuts in the northern part of the country in recent weeks.

“Power cuts are affecting many business activities, especially some industrial sectors,” the minister said, pledging new investments in coal and hydropower-dependent electricity grids as well as highways, ports and airports. Phuc said at least 700 billion dong ($30 million) was set aside annually for infrastructure investment.

In March, the National Assembly appointed Vo Van Thuong as the country’s second-in-command after the resignation of her predecessor. The reshuffle comes amid a years-long anti-corruption campaign that has allowed Communist Party chief Nguyen Phu Trong to consolidate his hold on power by eliminating potential rivals.

Business lobby groups and investors said decision-making had stalled in the wake of the anti-corruption crackdown.

Fuchs dismissed suggestions that the reshuffle would have an effect on the economy. “The aim of cracking down on corruption is to make the economy healthy and transparent,” he said.