Vietnam’s economic growth target of 6.5 percent this year could be at risk amid a global slowdown weighing on exports, lingering crisis in the local property sector and higher interest rates hampering businesses, lawmakers said.
This year’s forecast expansion is proving to be “challenging,” after weak GDP growth in the first quarter and as the construction sector and capital markets face financial difficulties, Vietnamese Economic Committee of the National Assembly head Vu Hong Thanh said at the opening session of the parliament yesterday in Hanoi.
Lawmakers reiterated calls for the central bank to consider more policy rate cuts, and for banks to lower lending rates to aid businesses.
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There is 104 trillion dong (US$4.4 billion) worth of bonds due in the third quarter, which could present “hidden risk to the markets,” Thanh said.
The State Bank of Vietnam has reduced its key rates twice this year, after GDP slowed to 3.32 percent last quarter while exports shrank in three of the past four months, reflecting the risks that global and domestic challenges pose to one of the region’s fastest-growing economies.
“The world economic situation continued to decline, consumer demand in our main markets dropped sharply due to inflation, geopolitical tensions and countries’ tightening monetary policies,” Vietnamese National Assembly Chairman Vuong Dinh Hue said.
Vietnam, which rarely posted lower than 5 percent GDP growth before the COVID-19 pandemic, is taking a hit from slowing global demand exacerbated by funding woes amid the government’s anti-graft campaign that has deterred investors.
Vietnam’s exports make up more than 100 percent of the economy, making it one of the most trade-dependent nations in the world.
The “property market and its businesses continue facing so many difficulties in liquidity, cash flows with many late in paying bond principals and interests,” Thanh said.
Business activity in manufacturing, especially among small and medium-sized enterprises are impaired by declining global orders, Vietnamese Deputy Prime Minister Le Minh Khai said in a speech.
Fitch Ratings last week said that while property sector risks have made operating conditions more difficult for banks in Vietnam, the “liquidity crunch is easing, and the banking system is likely to avert a sharp slowdown,” thanks to the response of policymakers and lenders.
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