Explained: ADB December Revisions to VN GDP Growth Forecasts

Posted by Written by Mark Barnes Reading Time: 3 minutes

The Asian Development Bank (ADB) releases updates quarterly. Here’s a breakdown of what their December update says about Vietnam’s economic future.

The ADB has released its Asian Development Outlook 2022 Supplement with revised growth forecasts for Vietnam. For 2022 it has revised its outlook up, predicting 7.5 percent for the year as it draws to an end.

For 2023, however, the ADB has cut its growth forecast to 6.3 percent. This is down from September estimates that suggested Vietnam may reach close to 6.7 percent growth next year.

This still makes Vietnam Southeast Asia’s fastest growing economy in 2023 though the Philippines is not far behind.

Why was Vietnam’s 2022 GDP forecast revised up?

The ADB cited a number of factors behind revising Vietnam’s GDP growth upwards for 2022.

Stronger consumption

Improved mobility has been key to Vietnam’s economic rebound, according to the report.

When the last of Vietnam’s COVID restrictions were lifted at the start of the year, the Vietnamese people embraced their newfound freedom by heading to the shops.

Vietnam experienced strong domestic consumption in 2022, recording a year-on-year increase in retail sales of 17 percent in October.


But domestic consumption wasn’t just driven by local shoppers. Relaxed border restrictions have seen international tourist numbers climb steadily since the beginning of the year. From almost no international arrivals in 2021, Vietnam counted 2.4 million by October of 2022.

Export growth

Vietnam’s exports in the first nine months of 2022 were 17.3 percent higher than a year earlier, totalling US$282.52 billion. A big part of this was clearing backlogs from the COVID lockdowns that plagued the end of 2021.

There has also been vast sums of foreign direct investment (FDI) injected into Vietnam’s economy this year. Over US$25 billion was recorded up to November putting Vietnam well on the path to a record-breaking year for FDI.

The ADB notes, however, that moving forward, ‘consumer and business confidence are likely to be affected by high inflation and rising interest rates’.

Why was Vietnam’s 2023 GDP forecast revised down?

There were a number of reasons why the ADB cut Vietnam’s GDP growth outlook for 2023.

‘Little liquidity is left for economic recovery after recent monetary tightening’

Vietnam held out on raising interest rates for the better part of 2022. It wasn’t until September that it made its first move upward. This was followed in October with a second interest rate rise.

It should be noted that data in the ADB’s report is based on information available up to November 30.

On December 5, however, the State Bank of Vietnam announced that it would be loosening monetary policy. Specifically, it would be expanding limits on how much money banks can lend by 1.5 to 2 percent.

In real terms, this should facilitate an additional US$10 billion being injected into the economy.

‘A decline in corporate debt issuance from January to October’

Vietnam’s corporate bonds market has had a challenging year. Several overleveraged real estate firms and the arrest of a prominent real estate tycoon have dampened investor confidence in the bond market. To that end, Decree 65 was issued to tighten regulations around corporate bond issuance. This has had an almost immediate effect.

In the first quarter of 2022, US$5.7 billion worth of bonds were offered to the public. In the third quarter, that number dropped to US$2.8 billion.

But the biggest drop in bond sales was seen from the point that Decree 65 came into effect in September to late November, with just US$295 million in sales recorded according to Vietnamnet.

In response to this sharp drop in bond sales, the Ministry of Finance last week proposed putting a one-year hold on implementing Decree 65.

‘A slowdown in disbursement of public investment’

By the end of November 2022, Vietnam’s disbursement of public investment had reached US$14 billion, just 58.33 percent of planned disbursements.

By contrast, in 2021, Vietnam disbursed US$19 billion or 93.47 percent of its target.

Delays in public disbursements are typically due to problems acquiring the land for projects, arranging resettlement and compensation for landowners, and poor planning. This year, the Ministry of Planning and Investment has also cited the rising cost of raw materials, which is pushing up project costs.

‘Signs show weakening global demand for the country’s exports’

In the last quarter of this year, orders for manufactured goods have seen a decline with S&P Global Vietnam Manufacturing Purchasing Managers Index dropping below the crucial break-even point of 50. In November it hit 47.4 down from 50.6 in October. This indicates that Vietnam’s manufacturing sector may be in a contraction.

This is largely due to external economic factors. Inflation in key markets, including the US and EU, is stemming consumer spending, which is in turn leading to reduced orders of manufactured goods in Vietnam and subsequently, job losses.

What’s next?

All things considered, the ADB’s December Outlook Supplement is relatively positive for Vietnam. It does, however, highlight some key challenges that will not go away any time soon. A full review from the ADB is expected in April of next year, which should shed greater light on the bank’s expectations for 2023.

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