Following a slowdown in 2023, the economy is exhibiting signs of recovery in early 2024. While exports are rebounding, consumption and private domestic investment are increasing at a slower pace. Real exports are anticipated to grow by 3.5% in 2024, reflecting a gradual improvement in global demand. Moreover, a revival in the real estate sector is expected later this year and next, boosting domestic demand as investors and consumers regain confidence. Real total investment and private consumption are forecasted to rise by 5.5% and 5% in 2024, respectively.
The report emphasizes the necessity of continuous fiscal policy support to strengthen the recovery. It suggests accelerating infrastructure investment projects funded by public resources. This would further stimulate the economy, potentially adding 0.1 percentage point to GDP growth for every 1 percentage point increase in public investment as a share of GDP. Meanwhile, in terms of monetary policy, the scope for further interest rate cuts is limited due to the interest rate differential between domestic and international markets.
It is of utmost importance to prioritize the stability of the financial sector, particularly by effectively managing the potential risks linked to the rise in bad debts. This includes addressing the declining asset values in the real estate market. The capital buffers of commercial banks are relatively fragile, and the downturn in the real estate market could exacerbate the strain on their capital.
“Investing in public infrastructure projects goes beyond immediate economic stimulus,” said World Bank East Asia and Pacific Practice Manager for Macroeconomics, Trade, and Investment Sebastian Eckardt. “Efforts to enhance public investment management will also address critical infrastructure gaps in energy, transportation, and logistics, which are fundamental for Viet Nam’s long-term economic growth.”
The special section of the report provides recommendations on how to support innovative startups in order to contribute to Viet Nam’s productivity growth. It emphasizes the importance of creating a more favorable environment, as there are still significant barriers in various sectors. These barriers include regulations, skills shortages, limited technology absorption, and difficulties in accessing early-stage financing. To foster the growth of innovative firms in Viet Nam, the following actions could be taken:
Restructure the key ecosystem support program (Program 844) to develop a pipeline of investment-ready firms. This involves improving support mechanisms, collaborating with private fund managers to establish local early-stage funds, and enhancing the capabilities of ecosystem stakeholders such as incubators and accelerators.
Simplify regulations by expediting reforms that address regulatory barriers for domestic investment funds (e.g., Decree 38 on startup investment funds). Additionally, streamline procedures to facilitate investments from both domestic and foreign sources into Viet Nam, particularly for investments in innovative startups.
Increase the involvement of academia and public research institutions. Empower universities and public research institutions to contribute to startups by revitalizing incubators, accelerators, and entrepreneurship training centers through public-private partnership models.
The public research sector can also play a larger role by modernizing the intellectual property and technology transfer framework, incentivizing research efforts with commercialization potential, and enhancing the capacity of universities and research institutions to effectively transfer technology to startups.