ADB Raises Vietnam GDP Growth Forecast to 7.8% on Strong Domestic Consumption and FDI

The Asian Development Bank (ADB) has revised its forecast for Vietnam's Gross Domestic Product (GDP) growth in 2023 to 7.8%, an upward adjustment of 0.6 percentage points from its earlier projection. This revision is attributed to strong domestic consumption and stable inflows of foreign direct investment (FDI). According to ADB's latest report, Vietnam's economy has maintained robust growth across all sectors in the first half of the year, with GDP expanding by 8.2% year-on-year. This growth is supported by a recovery in domestic demand and sustained FDI into Vietnam. As of the end of August, total registered FDI capital into Vietnam reached nearly $40.6 billion, an increase of over 55% compared to the same period last year. Notably, new registered capital surged by approximately 97% to nearly $22 billion. However, the actual purchasing power of the economy has not yet shown significant improvement. While the total retail sales of goods and consumer service revenue for the first eight months increased by over 13% year-on-year, the real increase, excluding price factors, was only 7.6%. This indicates that economic growth is primarily driven by investment. Measures such as the 2% VAT reduction until the end of the year are expected to help sustain domestic consumption. ADB highlights that FDI, public investment, and private capital channeled into large infrastructure projects remain the main drivers of GDP. As of early September, over VND 513.3 trillion in public investment had been disbursed, equivalent to 50.2% of the annual plan. Domestic corporations are also playing an increasingly crucial role in urban and infrastructure development, with significant capital expected to be mobilized from banks, potentially providing a strong impetus for the construction sector and short-term growth. Concurrently, ADB cautions that increased reliance on bank loans could heighten liquidity risks, maturity mismatches, and credit concentration. The sustainability of future growth will depend on whether large infrastructure projects generate higher productivity and sufficient cash flow to service related debts. Furthermore, the Vietnamese economy faces risks from global trade instability, escalating geopolitical tensions, and rising energy costs towards the end of the year. These challenges could pose further risks to exports, investment, and inflation. Based on these factors, ADB forecasts Vietnam's inflation rate to be 4.3% this year, declining to 4% by 2027. The economic growth rate for next year is projected to be around 7.6%. Several international organizations have recently raised their GDP growth forecasts for Vietnam. UOB bank anticipates an 8.5% GDP growth in 2026, the International Monetary Fund (IMF) estimates 7.5%, and Standard Chartered Bank has raised its 2023 GDP growth forecast to 9.5%, projecting 11% for the following year.