Vietnamese economy recovers rapidly thanks to drastic actions: IMF expert

Vietnam'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 Vietnam.

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

In a recent interview granted to the Vietnam News Agency in Washington D.C., the official said that Vietnam’s economy rebounded and grew by 6.4% year-on-year in the first half. He attributed this to thriving exports and actions taken by the government and the State Bank of Vietnam (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% for the whole year.

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

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 Vietnam 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, Vietnam 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 Vietnam. In the past 15-20 years, Vietnam'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 Vietnam’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.

TB (according to VNA)