[Podcast] Ho Chi Minh City Economic Report: Recovery and Challenges – Part 3: Outlook towards Ho Chi Minh City economic for the last 6 months of 2024 and policy suggestions

“Ho Chi Minh City Economic Report: Recovery and Challenges”, a scientific research publication published by University of Economics Ho Chi Minh City (UEH) and Ho Chi Minh City Statistics Department coordinating to provide a comprehensive view of Ho Chi Minh City’s economy in the first 6 months of 2024, presents the results achieved, challenge analysis, recovery forecast, as well as proposes some development policies towards the Ho Chi Minh City. In Part 3 of this article, the authors are to analyze the prospects of Ho Chi Minh City’s economy in the last 6 months of 2024 and to make policy suggestions for the City government.

Economic outlook of Ho Chi Minh City (HCMC) in the last 6 months of 2024

The outlook towards the economics of HCMC for the last 6 months of 2024, first of all, depends on the world’s economic situation. The research team assesses that the world economy will continue its gradual recovery in the last 6 months of 2024. The export activities of HCMC will continue to receive favorable traction from two major markets: the US and China. The growth in exports will continue to support the recovery of aggregate demand for goods and services in HCMC.

In the last 6 months of 2024, the consumption in HCMC will continue the recovery trend compared to that of the same period of last year. The research team evaluates the consumption growth in HCMC which is tending to be slightly better than the average level of the whole country. However, the recovery rate of consumption will, generally, be gradual because of people’ precautionary mentality against risks and uncertainties in the economy. This is a normal reaction of human beings, consumption, in general, depends a lot on people’ expectations regarding the economy and the future income.

The situation of domestic enterprises in HCMC needs more attention in the last 6 months of 2024. The research team evaluates the investment growth in HCMC which is tending to be lower than that of the national average. In the context that bad debt shows no signs of decreasing while lending interest rates are increasing, the domestic businesses are more likely to face diverse difficulties in the last 6 months of 2024. This is a hot spot that HCMC needs to focus on monitoring.

Policy suggestions towards promoting aggregate demand

In the last 6 months of 2024, HCMC should continue to maintain and to promote discount promotions to stimulate people’ consumption. HCMC should research connects these programs with cultural, sports and tourism events to increase the spillover effect. HCMC should research and organize more focused events at the district level to support businesses in promoting their products to other people. If organized effectively, these event programs will be a very practical way of supporting HCMC for businesses. HCMC should strengthen connections with neighboring localities to support HCMC’ businesses so as to promote products to these markets and vice versa.

HCMC needs to focus resources to remove difficulties for domestic businesses to promote private investment. First, in the context of increasing bad debt, small and medium-sized enterprises that do not have many valuable mortgaged assets will have difficulties in accessing credit to maintain and to invest in expanding production and business. Within the framework of its functions, HCMC needs to find solutions to support businesses in accessing credit. Second, HCMC should continue to promote administrative procedure reform to minimize time and costs for people and businesses in registering investment, production and business, especially in the fields of construction and real estate.

HCMC must quickly evaluate in detail the export activities of businesses to promptly launch programs to support businesses so as to make the most of opportunities coming from the recovery of the world market and to promote the export activities in the last 6 months of 2024. Besides, HCMC should take advantage of this opportunity and take advantage of the time to reduce its dependence on exports. Specifically, HCMC needs to research specific action programs to support businesses in the area expanding to potential markets outside of China and the US to diversify export markets⁴. The fixed costs to research the market, the regulations and thr requirements of the host country for goods imported from Vietnam will be relatively high for a single business. HCMC needs to proactively research and to support information for businesses.

Last but not least, HCMC needs to make every effort in the last 6 months of the year to disburse public investment faster, especially key works and projects. In addition to the direct contribution of public investment expenditures to economic growth, the completion of key works and projects will contribute to reducing production and business costs and increasing profits, resulting in the contributing part of promoting private investment and foreign direct investment.

Conclusion

In the first 6 months of 2024, the economy of Ho Chi Minh City, in particular, and that of Vietnam, in general, both achieved positive growth rates, continuing the recovery momentum after a period of being heavily affected by the COVID pandemic. These growth figures reflect that aggregate demand for goods and services continues to recover steadily. In HCMC, consumption is an important factor contributing to the recovery of aggregate demand. However, the recovery rate of consumption is being not high. Along with the recovery of the global economy, especially the two major markets (the US and China), exports are also a factor contributing to the recovery of aggregate demand. Meanwhile, investment is recovering at a rather modest pace. Private investment is presenting signs of slowing growth as well as domestic businesses are facing many difficulties while public investment disbursement is being rather slow.

In the last 6 months of 2024, the export of HCMC, in particular, and that of Vietnam, in general, will continue to benefit from global economic growth, especially two large markets: the US and China. However, all of these economies are facing their own difficulties and have not absolutely entered a solid recovery trajectory. Therefore, risks and uncertainties may be to occur, negatively affecting exports.

An important group of policies that HCMC, in particular, and Vietnam, in general, need to pay more attention in the last 6 months of 2024 so as to quickly stimulating domestic consumption and investment. This group of policies both helps aggregate demand recover faster and reduces dependence on exports, resulting in the minimizing the cyclicality of the economy in the face of fluctuations in the world economy. This issue will become even more pressing in the contexts of HCMC, in particular, and Vietnam, in general, must adapt to a world economy which is becoming increasingly risky and uncertain.

If the world economy develops smoothly as expected in the last 6 months of 2024, together with the fact that HCMC is determined to effectively and synchronously deploy solutions so that, in the whole year 2024, HCMC can achieve a growth rate of 7-7.5%. More important than the growth figure in 2024, HCMC needs to focus on accelerating the process of transforming the growth model towards high technology and greening. This is a key factor to help the HCMC increase growth rate in the medium term.

Please refer to the full research Ho Chi Minh City Economic Report: Recovery and Challenges HERE.

Author group: Dr. Ho Hoang Anh – University of Economics Ho Chi Minh City (Editor); MSc. Nguyen Van Thang – Ho Chi Minh City Office of Statistics (Co-editor); Le Minh Hung – Ho Chi Minh City Office of Statistics; Dr. Nguyen Thanh Binh, Ho Chi Minh City Office of Statistics; MSc. Vo Duc Hoang Vu – University of Economics Ho Chi Minh City.

Consultancy Board: Prof. Dr. Nguyen Dong Phong – Party Secretary, Chairman of the Council of the University of Economics Ho Chi Minh City; Prof. Dr. Su Dinh Thanh – Director of University of Economics Ho Chi Minh City; MSc. Nguyen Khac Hoang – Director of Ho Chi Minh City Office of Statistics; Prof. Dr. Nguyen Trong Hoai – Editor-in-Chief of Journal of Asian Business and Economic Studies, University of Economics Ho Chi Minh City; Assoc. Prof. Dr. Pham Khanh Nam – Principal of UEH College of Economics, Law and Government.

This is an article in a series of articles spreading research and applied knowledge from UEH with the message “Research Contribution For All – Research For The Community”, UEH respectfully invites dear readers to look forward to the upcoming UEH Research Newsletter Insights #129.

News and photos: Author group, UEH Department of Marketing and Communications