Background

In 2023, the global economy continued to face considerable instability: global inflation remained high, central banks continued to pursue tight monetary policy, many major economies experienced slower growth, and political factors such as the Russia-Ukraine war remained highly complex, while the Israel-Hamas conflict grew increasingly tense.

Against this backdrop, Vietnam’s economy also faced numerous challenges. Gross domestic product (GDP) grew by 5.05% in 2023 compared with 2022, exceeding only the growth rates of 2.87% and 2.56% recorded in 2020 and 2021, respectively, during the 2011-2023 period. In 2023, the industry and construction sector showed no positive signs of recovery, growing by only 3.74% year over year (low compared with average growth of 8.6% in 2015-2019). Within this sector, processing and manufacturing grew by 3.62% year over year, also the lowest annual growth rate in the 2011-2023 period. Inventories across processing and manufacturing increased by 19.8% compared with the same point a year earlier (when the corresponding increase was 13.9%). Meanwhile, the real estate market experienced numerous difficulties and challenges. Transaction volumes declined, and demand for purchases remained low as investor sentiment weakened and investors adopted a wait-and-see approach, leaving overall market liquidity without signs of recovery. Total transactions over the four quarters of 2023 reached approximately 18,600 units from projects in the primary market, equivalent to only 17% of the level in 2018, before the Covid-19 pandemic.

Total realized investment across the economy at current prices increased by only 6.2% in 2023 compared with the previous year (versus 11.2% in 2022). Within state-sector investment, realized investment funded by the state budget in 2023 reached only 85.3% of the annual plan and increased by 21.2% year over year. Realized investment from the non-state sector grew by only 2.7%, far below the 8.9% increase in 2022. Similarly, realized foreign direct investment (FDI) in Vietnam in 2023 increased by only 5.4% (versus 13.9% in 2022). Meanwhile, spending momentum also tended to decline. For 2023 as a whole, total retail sales of goods and consumer service revenue increased by only 9.6% year over year (versus 20% in 2022), or 7.1% excluding price effects (versus 15.8% in 2022). Declining household incomes led to reduced consumer demand for goods. Data for 2023 show that final consumption increased by only 3.52% year over year (versus 7.09% in 2022). In tourism services, despite efforts to attract international visitors back to Vietnam, international arrivals in 2023 were estimated at 12.6 million, 3.4 times the previous year’s figure but still only 70% of the level in 2019, before the Covid-19 pandemic.

In international trade, financial issues in Europe and the United States, such as public debt and high interest rates, contributed to restraining the economy and reducing global aggregate demand, significantly affecting countries with export-led growth strategies such as Vietnam. For 2023 as a whole, export and import values both fell sharply year over year, declining by 4.4% and 8.9%, respectively, as demand decreased across Vietnam’s major markets, including the United States, the Association of Southeast Asian Nations (ASEAN), the European Union (EU), and several East Asian countries. Export volume to the U.S. market recorded the steepest decline, at 11.6%, while import volume from South Korea fell by 15.5%, the largest decrease among major markets. This caused output of several of Vietnam’s key industrial products to decline sharply compared with 2022.

By the end of 2023, credit to the economy had grown by 13.5% (compared with 14.5% the previous year), against a credit growth target of 14%. Vietnam’s economy is highly open, and business operations depend heavily on the international economy. Meanwhile, the global economy remained unstable, inflation was trending downward but remained high, and declining demand for trade and investment affected domestic enterprises’ investment activities. Regarding access to capital, some customer groups, such as small and medium-sized enterprises (SMEs), needed loans but did not meet lending conditions, while others, such as real estate enterprises, faced obstacles related to legal procedures. Thus, amid widespread difficulties, domestic demand for investment, production and business activities, and consumption all declined, leading to a corresponding reduction in credit demand. Although the two-year economic recovery support package for 2022-2023 had expired, disbursements remained very low, failing to provide timely support for the difficulties enterprises faced.

These figures indicate a sharp decline in aggregate demand in Vietnam’s economy, as all three components—investment, exports, and consumption—weakened. Aggregate demand plays an important role in determining the level of economic activity and employment in an economy. Declining aggregate demand indicates a risk of recession, affecting overall economic growth and causing consequences such as falling industrial production, rising unemployment, and reduced household incomes and spending. Restoring aggregate demand was therefore an important task for Vietnam in 2023. This requires the Government and relevant ministries, commissions, and agencies to urgently take appropriate, timely measures to strengthen growth drivers on the aggregate demand side, thereby restoring aggregate demand and laying the groundwork for economic development in a new context.

Accordingly, in addition to providing an overall assessment of the economy, the Vietnam Annual Economic Review 2023 will focus on growth drivers on the aggregate demand side, with the aim of restoring aggregate demand and economic growth. The study will provide an important basis for formulating key policy recommendations for economic growth in a new context.

Research Objectives

The Vietnam Annual Economic Review 2023 by National Economics University (NEU) adopts the theme “Boosting Aggregate Demand for Economic Growth in a New Context” to provide a comprehensive review of Vietnam’s economy in 2023 (achievements and remaining shortcomings, an assessment of causes, and an analysis of opportunities and challenges). The report also assesses the current state of aggregate demand and its components; achievements, remaining limitations, and their causes; and the contributions of aggregate demand components to economic growth. On that basis, it proposes directions and policy recommendations for economic management in 2024 and subsequent years, as well as policy recommendations to boost aggregate demand toward sustainable economic growth in a new context.

Based on this overall aim, the report pursues the following specific objectives:

• Clarify the global economic context and its impact on Vietnam’s economy in 2023;
• Assess developments in Vietnam’s economy in 2023 through its main sectors (the real sector, the monetary and financial sector, and the fiscal sector); identify achievements and limitations, and assess the causes of those limitations;
• Assess the current state of aggregate demand and its components (investment, consumption, and net exports), achievements, remaining limitations, and their causes. Assess the contributions of these components to economic growth.
• Analyze opportunities and challenges in 2024; assess Vietnam’s economic outlook for 2024; and, on that basis, recommend policies to boost aggregate demand and contribute to sustainable growth in a new context.

Subjects and Scope of Research

The subjects of the study are the global economy and Vietnam’s economy, with a focus on aggregate demand and its components.

Time frame: The overall review of Vietnam’s economy covers 2023. The assessment of the impact of aggregate demand components on growth uses the 2011-2022 period for quantitative impact analysis.

Scope of content: The general economic overview will focus on the economy’s main sectors (the real sector, the monetary and financial sector, and the fiscal sector). The assessment of aggregate demand components will examine investment (including public investment, private investment, and foreign direct investment), consumption (household consumption and government consumption), and net exports.

Research Methods and Data

To achieve its research objectives, the report uses quantitative, qualitative, statistical, comparative, analytical, and synthesis methods.

Information and data are drawn primarily from official Vietnamese data sources, including the General Statistics Office (GSO), the Ministry of Finance (MOF), the State Bank of Vietnam (SBV), the Ministry of Planning and Investment (MPI), and the Ministry of Labor, Invalids and Social Affairs (MOLISA), among others, as well as international organizations such as the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the World Bank (WB), and the Asian Development Bank (ADB). The report also uses Fiingroup macroeconomic, financial, and securities data, along with data from financial institutions and banks.

Report Structure

In addition to the Introduction, the report includes an Executive Summary and a Main Report. The Executive Summary will summarize the entire report in a nontechnical, reader-friendly style.

The main report is structured in three parts. As this is an annual economic review, Part I (Vietnam’s Economy in 2023) provides an overview of Vietnam’s economy in 2023. This part covers: i) global economic developments in 2023; ii) an overview of Vietnam’s economy in 2023 by sector (the real sector, the monetary and financial sector, and the fiscal sector).

Part II (The State of Aggregate Demand and Its Role in Growth) aims to assess the state of aggregate demand and its components, as well as the impact of these components on growth. This part covers: i) an overview of aggregate demand in Vietnam; ii) the state and role of the investment component; iii) the state and role of the consumption component; iv) the state and role of the net exports component.

Part III (Economic Outlook for 2024 and Policy Recommendations) presents the global and Vietnamese economic outlook for 2024. Drawing on the research findings in Parts I and II, it also offers recommendations on macroeconomic policies in general and policies to stimulate the components of aggregate demand to support economic growth in the new context.

About the Authors

Editors

Prof. Dr. Pham Hong Chuong earned his doctorate in Economics from National Economics University (NEU). He is currently President of NEU. His main research areas are tourism economics, industrial policy, and management science.

Prof. Dr. To Trung Thanh earned his doctorate in Economics from the University of Birmingham, United Kingdom. He previously served as a member of the Policy Advisory Group (PAG) for the Ministry of Finance and the Macroeconomic Advisory Group (MAG) for the Economic Committee of the National Assembly. He is currently Head of the Department of Research Management and conducts research and teaches at NEU’s Faculty of Economics. His main research areas are macroeconomic analysis, digital transformation and the digital economy, financial stability, and analysis of firm performance.

Other authors (in alphabetical order)

MSc. Nguyen Ngoc Anh earned her master’s degree in Finance from Macquarie University, Australia. She currently works at NEU’s Faculty of Economics. Her main research areas are corporate financial analysis, corporate governance, the digital economy, and the circular economy.

Assoc. Prof. Dr. Vu Sy Cuong earned his doctorate in Financial Economics from Paris 1 Pantheon-Sorbonne University in the French Republic. He is currently Deputy Head of the Division of Financial Policy Analysis and teaches at the Faculty of Public Finance, Academy of Finance. He has served as a consultant on projects for the Economic Committee and the Finance and Budget Committee of the National Assembly, as well as international organizations. His main research areas include fiscal and monetary policy analysis, macroeconomic policy analysis, and state-owned enterprises…

Assoc. Prof. Dr. Le Thanh Ha earned his doctorate in Economics from the National Graduate Institute for Policy Studies (GRIPS), Japan. He currently conducts research and teaches at NEU’s Faculty of Economics. His main research areas are energy finance, green finance, financial stability, digital transformation, international economics, and analysis of firm performance.

Assoc. Prof. Dr. Pham Van Hung earned his doctorate in Economics from NEU and conducted postdoctoral research at Macquarie University, Australia. He is a member of the Executive Committee of the Hanoi Economic Science Association. He is currently Dean of the Faculty of Investment and conducts research and teaches at NEU’s Faculty of Investment. His main research areas are investment economics, project management, public investment, foreign direct investment, and capital markets.

Assoc. Prof. Dr. Nguyen Thi Thanh Huyen earned her doctorate in Development Economics from NEU. She is currently Vice Dean of the Faculty of Environment, Climate Change and Urban Studies at NEU. Her main research areas are sustainable development, inequality, public finance, and urban finance.

Dr. Truong Thi Hoai Linh earned her doctorate in Economics from NEU. She is currently a senior lecturer at NEU’s School of Banking and Finance. Her main research areas are commercial bank management, bank accounting, and microfinance.

Dr. Pham Xuan Nam earned his doctorate in Economics from NEU. He currently works at NEU’s Faculty of Economics. His main research areas are firm growth and the factors influencing it.

MSc. Tran Anh Ngoc earned his Master of Science in Accounting and Management from the University of Southampton, United Kingdom. He is currently a doctoral student in Finance at the University of Lincoln, United Kingdom. He also teaches at NEU’s School of Banking and Finance. His main research areas are monetary and financial theory, corporate financial analysis, and financial inclusion.

MSc. Luu Thi Phuong earned her master’s degree in International and Development Economics from the Australian National University (ANU). She currently works at NEU’s Faculty of Economics. Her main research areas are macroeconomic policies (fiscal and monetary policies) and applied economics.

Assoc. Prof. Dr. Le Thanh Tam earned her doctorate in Economics, specializing in Finance and Banking, from NEU. She is currently Head of the Division of Commercial Banking at NEU’s School of Banking and Finance. She participates in numerous research and consulting projects for the State Bank of Vietnam and international organizations such as the Asian Development Bank (ADB), the World Bank, the International Finance Corporation (IFC), and the United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development (UNSGSA), as well as other organizations. Her main research areas are bank governance and supervision, microfinance, financial inclusion, and fintech.

Dr. Nguyen Quynh Trang earned her doctorate in Economics from NEU. She is currently a senior researcher in the Department of Human Resources and Social Development Strategy at the Development Strategy Institute (Ministry of Planning and Investment). Her main research areas are strategies and master planning for socioeconomic development, macroeconomic issues, productivity, supporting industries, and human resource development.

Dr. Bui Trinh earned his doctorate in Economics from Kyoto University, Japan. He currently works at the Vietnam Development Research Institute (VIDERI). His main research area is input-output (IO) table analysis.

Dr. Nguyen Thanh Tung earned his doctorate in Economics from Hitotsubashi University, Japan. He is currently a lecturer at NEU’s Faculty of Economics. His main research areas include labor economics, development economics, industrial organization, and applied microeconomics.

Dr. Vu Thi Thuy Van earned her doctorate in Economics, specializing in Finance and Banking, from NEU. She is currently a lecturer in the Division of Securities Markets at NEU’s School of Banking and Finance. Her main research areas are systemic risk in securities markets and the governance of listed companies.

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