Hanoi (VNA) – Vietnam’s 2023 growth isbelow-trend amid global external headwinds, but its position as a manufacturingFDI darling remains intact, DBS, Singapore’s leading consumer bank, said in areport released on July 3.

The report pointed out that economic growth inexternally oriented Vietnam rebounded in the second quarter but stayedsluggish, given the challenging global economic environment.

In the second half of this year, Vietnamese exportswill likely improve modestly as the global electronics cycle rebounds.Vietnam’s domestic services and foreign tourism will likely continueoutperforming and stay supportive.

The economy will be held up by easier fiscal andmonetary policies, the report said, noting that Vietnam’s construction growthpicked up strongly in the second quarter, with momentum to be supported byincreased implementation of government infrastructure projects. Improvements wouldbe critical for Vietnam to stay competitive and continue attracting foreign investmentsover the long term.

Yet, tight monetary conditions in advanced economieswill likely restrain a strong upturn in global external demand for Vietnameseproducts and overall growth prospects, it said.

“Despite the cyclical headwinds, FDIwill remain a structural tailwind amid global supply chain diversification,”according to the report.

Vietnam’s export-oriented manufacturing growth decelerated sharply amidglobal external headwinds but bounced in the second quarter. Similar uptick wasalso seen in monthly goods exports figures. Electronics, the largest goodsexport product at nearly 30% of total, could turn positive by the second quarter.

“We expect Vietnam to remain a keybeneficiary for re-location or co-location of production, supported by itsalready well-known and favourable factors,” the report said.

These include competitive costs for arelatively skilled workforce, extensive free trade agreements (FTA), its brightmedium-term growth prospects of 6%-7%, and a growing electronics ecosystem.

Total newly registered FDI in Vietnam grew by around 30% year-on-year inthe first half after performing poorly in 2022.
Crucially, new manufacturing FDI inflows picked up strongly in 2023,despite global economic headwinds, and after being resilient over the pastcouple of years (2020 to 2022) when the world suffered from the pandemic.

“This trend reflects foreign investors’ still-high confidence inVietnam’s long-term potential. Its position as an FDI darling will likely tostay intact for some time,” the report said./.