Vietnam’s economic growth is forecast to moderate at 6.5% in 2023 and hit 6.8% in 2024, as per the Asian Development Outlook (ADO) released by the Asian Development Bank (ADB) published on Tuesday.

Economic growth in Vietnam this year will be hampered by the global economic slowdown, geopolitical tensions and ongoing monetary tightening, said ADB Country Director for Vietnam, Andrew Jeffries.

Nevertheless, he said the country’s growth support policy with monetary easing, the reopening of China, and a significant amount of public investment to be distributed this year would help Vietnam offset the headwinds.

In addition, the Asian Development Outlook said the global economic slowdown exacerbated in Q4 last year and will likely continue in 2023, Vietnam Plus reports. Declining global demand is forecast to impact industrial growth, the report said, adding that agriculture output is predicted to grow by 3.2% in 2023 on revived domestic demand and China’s reopening.

Tourist arrivals from China beginning in mid-March are also forecast to benefit the tourism and services sector in Vietnam, which is set to grow by 8.0% in 2023.

Another main driver for economic recovery and growth this year and next is expected to be public investment, driving construction and other similar economic activities. Coupled with monetary easing last month, public spending is forecast to create significant multiplier effects, generating robust growth stimulus for the country’s economy.

Vietnam’s government is committed to distributing $30 billion over the year, according to the ADO, with 90% allocated to disbursing ministries and provinces. However, in contrast, foreign investment will continue to be impacted by the global economic slowdown, the report adds.

Moreover, according to the Principal Country Economist for Vietnam, Nguyen Minh Cuong, the fiscal deficit this year could surpass the target, which is 4.4% of GDP. He stated the country should progress with reforms to make its finances more sustainable, considerably reducing reliance on unsustainable revenue sources such as land and oil.