Domestic demand growth is expected to recover gradually in the country as companies navigate through high debt levels, while the real estate sector will only fully recover over the medium term.

Inflation is expected to hover around the central bank’s target of 4-4.5 per cent this year.

However, downside risks are high. Exports, a key driver for Vietnam’s economy, could weaken if global growth disappoints, global geopolitical tensions persist, or trade disputes intensify.

Given easy monetary conditions, if exchange rate pressures were to persist for longer, it could lead to a larger pass-through to domestic inflation.

IMF executive directors noted that risks remain elevated, and that further efforts are required to safeguard macro-financial stability and deepen reforms to address vulnerabilities and ensure robust, green and inclusive growth over the medium term. Continued capacity development will be important to support reforms.

Fibre2Fashion News Desk (DS)