(Bloomberg) — Vietnam’s government will prioritize supporting economic growth amid ongoing challenges from weak global demand, Deputy Prime Minister Le Minh Khai said.
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Gross domestic product growth has picked up but still faces many challenges, Khai said in an address to the National Assembly, which convened for the summer session on Monday. Industrial activity is slowly recovering, he said.
Vietnam, which has turned into an industrial powerhouse and has benefited from shifting supply chains amid US-China tensions, is feeling the brunt of global interest rates as they depress demand for goods. Although the economy’s growth is among the fastest in Asia, it is still below the pre-pandemic level of 7%.
The country will aim to achieve the highest possible economic output, Khai said, adding that the Southeast Asian country faces the prospect of high inflationary pressures this year.
While the war between Israel and Hamas has had limited economic impact globally so far, any escalation of tensions with Iran could choke off trade flows through the Strait of Hormuz – which some say could result in a drop in global GDP by 1 trillion dollars.
The Vietnamese government is targeting economic growth of 6%-6.5% this year – higher than the 5.8% forecast by the International Monetary Fund. The official inflation target is between 4% and 4.5%.
The government will continue policies including cutting interest rates on loans, delaying debt payments and cutting taxes to support businesses, Khai said.
Vietnam’s economy slowed in the first quarter due to an uneven recovery in exports and industrial activity. The return of an atmosphere of political stability is expected to support sentiment going forward.
The Communist Party this weekend announced the appointment of a new president and speaker of the National Assembly, in appointments that could reassure investors that the revolving door of top politicians will end.
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