Ho Chi Minh City Macroeconomic Report (Part 2): Economic Prospect of HCM in Year 2024 and Policy Suggestions

Ho Chi Minh City University of Economics (UEH) and Ho Chi Minh City Statistics Department officially launched "Ho Chi Minh City Macroeconomic Report: 2023 Results and 2024 Forecast". This is a scientific research publication between UEH and Ho Chi Minh City Statistics Department coordinates the implementation so as to provide a comprehensive view of Ho Chi Minh City's Economy in 2023 regarding the achieved results, the forecasts related to the prospects for 2024 and to propose suggested policies for HCM City government.

Part 2 of this article will provide in-depth analysis of Ho Chi Minh City’s economic prospects in 2024 and policy suggestions for the city government.

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Ho Chi Minh City’s economic outlook in 2024

The economic outlook in 2024 of Ho Chi Minh City in particular and Vietnam in general depend greatly on the world’s economic prospects. Most major research organizations in the world, at present, have the same opinion that: by 2024, the world economy will continue to recover gradually and it will be difficult for any breakthrough to occur for many reasons. Although the global production and the supply chain have presented the positive signs of recovery and are forecast to continue to improve in 2024, the risk of blockage or disruption is being rather high. Armed conflicts and geopolitical tensions are on the rise worldwide. According to the research by the Peace Research Institute Oslo based on Uppsala University’s Armed Conflict Data Project (Uppsala Conflict Data Program), the number, the intensity and the duration of the armed conflicts around the world has been at its highest level since the Cold War.

With global production and supply capacity are being recovering, the fact that the price pressures from limited supply will not disappear quickly will make the fight against inflation in the US and Europe likely to last longer. Therefore, the probability that the Central Banks in the US and Europe will start cutting interest rates in 2024, especially in the first half of the year, is rather low. Both the US and Europe are forecast to grow at a fairly modest pace in 2024.

The world’s second largest economy, China, is being in the process of resolving issues related to the crisis in the real estate sector. Although most major research organizations in the world recognize the Chinese government’s efforts to stabilize the financial system and boost aggregate demand, China’s growth is forecast to slow in the coming year 2024.

The fact that the major markets for Ho Chi Minh City’s exports in particular and Vietnam in general are both forecast to slow down in growth in 2024 demonstrates that HCM city’s exports will hardly be able to break through in 2024. This will be a challenge for Ho Chi Minh City and Vietnam in promoting the recovery of aggregate demand.

With the drastic disbursement of public investment in Ho Chi Minh City in particular and Vietnam in general, along with monetary policy, all of which are making efforts to overcome bad debts and to improve the liquidity of the banking system to clear the flow of credit into key areas, leading to recovery of aggregate demand in Ho Chi Minh City and Vietnam are expected to receive a major boost in 2024, especially in the last six months of the year.

Policy suggestions to promote aggregate demand

In addition to continuing to disburse public investment, Ho Chi Minh City, in order to support aggregate demand to recover faster, can focus on the policies to promote people’ consumption spending, investment in asset accumulation by businesses and households (especially in the real estate sector), and exports.

Ho Chi Minh City government should increase support and encouragement for businesses in HCMC to organize the discount promotions to stimulate people’ consumption. These programs need to be carefully evaluated and researched to effectively connect goods and services to people’ needs.

An important policy that Ho Chi Minh City government needs to pay more attention to supporting and encouraging businesses in HCM City in seeking partners and expanding export markets to countries beyond China and the US. Diversifying export markets will help HCM City’ exports to minimize cyclicality and to grow in a more stable condition. In accordance with 2022 data, three potential markets in three countries where Vietnam has signed a comprehensive strategic partnership agreement, currently, account for a very modest proportion of HCM City’s total export turnover, compared to Japan (7.16%), Korea (4.31%) and India (1.41%). India is, currently, an economy with high and stable growth.

Continuing to reform the administrative management apparatus towards streamlining procedures to minimize time and costs for people and businesses in registering investment, production and business, especially in the field of construction and real estate. In the short term, Ho Chi Minh City can research, classify, and rank real estate projects in order of priority and focus resources to quickly remove the difficulties for the most potential projects to create the fastest impact in the short-term future.

It is important that all policies aim at boosting aggregate demand in the short term that need to be placed within the framework of the goal of transforming the economic model in the medium term: Developing high-tech industries and financial services. The bank system manages and stably develops the real estate market to meet the housing needs of workers and supplement production and business activities. Ho Chi Minh City should, absolutely, not rush to pursue the growth target in 2024 at all costs and slow down the process of transforming the economic model in the medium term.

The world economy has been being in the process of recovering after a period of heavy impact by the COVID-19 pandemic, armed conflicts and geopolitical tensions that are on the rise worldwide.

Although the world economic outlook has introduced more positive signs, the road to recovery is forecast to face many challenges in 2024. Although it did not reach the set economic target regarding Ho Chi Minh City in particular and Vietnam in general will both achieve quite high growth rates in 2023 compared to other economies in the world. It can be stated that, by the end of 2023, Ho Chi Minh City’s economy will be recovering steadily after the severe effects of the COVID-19 pandemic.

A detailed look at the data by quarter in 2023 demonstrates a steady recovery of HCM City’s economy. The recovery of aggregate demand is clearly reflected through many indicators on consumption, investment and export. This is a signal that the world economy is gradually recovering, and HCM City’s policies in particular and Vietnam in general in adapting to change, taking advantage of new opportunities of the world economy are moving in the right direction and promoting their effectiveness.

To continue to support aggregate demand to recover further in 2024, Ho Chi Minh City government should focus on the policies to promote people’ consumption spending, investment in accumulated assets of businesses and households (especially in the real estate sector) and exports. In particular, a crucial policy to stimulate demand that is, currently, not being exploited effectively is diversifying export markets through supporting and encouraging businesses in this city. HCM City looks for partners and expands export markets to potential markets listed as Japan, Korea, and India. India is, currently, an economy with high and stable growth.

It is essential that all policies aim at boosting aggregate demand in the short term that need to be placed within the framework of the goal of transforming the economic model in the medium term: Developing high-tech industries and financial services. The bank system manages and stably develops the real estate market in order to meet the housing needs of workers and supplement production and business activities. In 2024, aggregate demand forecast for Ho Chi Minh City’s economy will continue to recover; on the other hand, it is unlikely to have a strong breakthrough. If the world economic situation recovers favorably together with the fact that Ho Chi Minh City synchronously implements solutions to promote aggregate demand, the GRDP growth target of 7.1-8% in 2024 is hopefully achievable.

Please refer to the full Macroeconomic Report of Ho Chi Minh City: 2023 Outcomes and 2024 Prospect. tại đây.

Author group: Dr. Hồ Hoàng Anh – University of Economics Ho Chi Minh City (UEH) (Leader); MSc. Nguyễn Văn Thắng – HCM City Statistics Department (Co-leader); Lê Minh Hùng – HCM City Statistics Department; Trần Thị Triêu Nhật – HCM City Statistics Department; MSc. Nguyễn Thanh Bình – HCM City Statistics Department; MSc. Võ Đức Hoàng Vũ – University of Economics Ho Chi Minh City (UEH).

Advisory Board: Prof. Dr. Nguyen Dong Phong - Party Committee Secretary, Chairman of the Council of University of Economics Ho Chi Minh City; Prof. Dr. Su Dinh Thanh - President of University of Economics Ho Chi Minh City; MSc. Nguyen Khac Hoang – HCM City Statistics Department; Prof. Dr. Nguyen Trong Hoai - Editor-in-Chief of Asian Economic and Business Research Journal, University of Economics Ho Chi Minh City; Associate Professor. Dr. Pham Khanh Nam - Vice President in charge of UEH College of Economics, Law and State Management.

This is an article in the series of articles spreading research and applied knowledge from UEH with the “Research Contribution For All – Nghiên Cứu Vì Cộng Đồng” message, UEH cordially invites dear readers to look forward to the upcoming Knowledge Newsletter ECONOMY No. #107.

News & photos: Group Author, UEH Department of Marketing & Communication