Taking Stock, August 2023: Making Public Investment Work for Growth

Taking Stock, August 2023: Making Public Investment Work for Growth

The World Bank (WB) released a new working paper, Taking Stock, August 2023: Making Public Investment Work for Growth.

The authors focus on assessing the impact of government investment policy on the prospects for Vietnam's economic development.

According to the WB, in 2022-2023. Vietnam's economic growth slowed down from 8% to 3.7%. The economic downturn is primarily due to a sharp decline in exports (by 12% in 2023), which account for 50% of the country's GDP. In turn, domestic demand declined due to the long-term impact of the COVID-19 pandemic and declining consumer confidence. Final consumption expenditure fell from 6.1% in 2022 to 2.7% in the first half of 2023. Moreover, more than 60% of firms reported a decline in revenue of at least 20% during Q1 . 2023, as well as a staff reduction of more than 5%.

Despite the negative dynamics, experts expect economic activity to recover in the second half of 2023 (4.7%) and gradually accelerate to 5.5% in 2024 and 6% in 2025. Broad fiscal space is among the key growth drivers *, active fiscal policy supporting short-term demand, lowering administrative barriers to stimulate investment.

The goal of Vietnam's state strategy is to become an industrialized country with a high quality of life for the population by 2045. It is estimated that to achieve the goal, it is necessary to invest an average of 7.3% of GDP in infrastructure annually from 2021 to 2030. At the same time, there is currently a decrease in investment activity from 8% of GDP in 2011 to 6% in 2022. Improving the efficiency of investment policy and strengthening control over public spending are of critical importance.

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