However, despite the robust growth, household spending remains weak, while micro, small and medium enterprises (MSMEs) continue to lag behind.

Most recently, Typhoon Yagi has caused extensive damage to the northern provinces. In light of these considerations, macroeconomic policies should be recalibrated to support domestic economic activity and the vulnerable segments, AMRO said in a release citing a preliminary assessment after its annual consultation visit to Vietnam from September 11-24.

AMRO contributes toward securing macroeconomic and financial stability of the ASEAN+3 region, comprising 10 members of the Association of Southeast Asian Nations (ASEAN) and China, Hong Kong, Japan and South Korea.

The country’s economy is projected to grow at 6.6 per cent in 2025. “However, the uneven economic recovery calls for a recalibration of macroeconomic policy mix to promote a more broad-based recovery, while safeguarding financial stability,” said AMRO lead economist Sumio Ishikawa.

Despite the temporary economic disruption caused by Typhoon Yagi, the outlook for Vietnam is improving in the near term due to resilient demand for export orders.

Inflationary pressure remains contained, owing to weak domestic demand, the recent decline in global oil prices, a tightening in liquidity condition and the appreciation of the Vietnamese dong.

Headline inflation is projected to rise from 3.3 per cent in 2023 to 4.1 per cent in 2024, remaining below the central bank’s target ceiling of 4.5 per cent.

The rebound in exports contributed to the current account surplus, while resilient FDI inflows continued to bolster the financial account.

However, large net errors and omissions, partly due to unrecorded transactions such as the purchase of virtual assets overseas, have resulted in a deficit in the balance of payments and a decline in international reserves this year. As of the latest data, Vietnam’s foreign reserves stood at $83.3 billion in July, equivalent to 2.5 times of short-term external debt, the AMRO release noted.

Risks to the growth outlook are tilted toward the downside. A weaker-than-expected consumer demand in the United States, a sharp growth slowdown in Europe, or a slower growth in China could disrupt the recovery of Vietnam’s exports and weaken its growth.

Export outlook also faces uncertainty resulting from possible changes in US trade policy after the presidential election.

Over the longer term, Vietnam faces challenges from inadequate infrastructure development and supply of skilled labour to match its rapid growth.

The under-development of domestic supporting industries and MSMEs has hindered the country’s efforts to move up the global value chains. Emerging challenges from cyber threats, extreme weather conditions and rapidly aging population are growing threats to macro-financial stability.

Fibre2Fashion News Desk (DS)