Illustrative image. (Photo: VNA)

Hanoi (VNA) – Two drivers of Vietnam's economic growth –exports and domestic demand – are moderating, according to a report released bythe World Bank (WB) on December 14.

The bank’s December report, Vietnam Macro Monitoring, shows that softer external demand has weighed onVietnam’s exports. Consumer rebound in the post-COVID period seems to recoverslowly and tighter domestic financial conditions and risinginflation could affect domestic demand in the future.

Due to weaker external demand, the growth of industrialproduction in November declined by 5.3% year-on-year, the lowest rate sinceFebruary 2022. The manufacturing Purchase Manager Index (PMI) also slippedbelow the 50 benchmark for the first time since October last year.

Retail sales decreased to 1♛7.5% in November from 20.7% inthe previous month.

Merchandise exports contracted by 8.4% year-on-year due toweakening external demand and high base effects associated with the rebound inthe four quarters of 2021. While total foreign direct investment (FDI)commitment dropped by 1.9% year-on-year, FDI disbursement maintained a robustgrowth of 4.4% compared with the same period last year.

Consumer Price Index (CPI) inflation reached 4.4% year-on-yearin November, up 0.1% compared to a month earlier, with food and housing beingtwo major contributors. Core inflation increased from 4.5% in October to 4.8% inNovember.

Average overnight interbank interest rate remained high at 5.7% in November. (Photo: VNA)

Credit growth fellfrom 16.5% in October to 15% in November, as domestic financial conditionstightened after the State Bank of Vietnam (SBV) raised key interest rates inSeptember and October. Average overnight interbank interest rate remained highat 5.7% in November.

The SBV announced a 1.5-2% increase of the credit growth capin early December. The Vietnamese currency, the dong, gained slightly in value in Novemberalthough its appreciation is one of the smallest compared to majorcurrencies and those of its neighbours.

As of the end of November, the national budget registered a 12.1billion USD surplus, equivalent to about 3% of GDP.

The WB recommended that Vietnamese monetary authorities consider allowing further flexibility in the exchange rate to absorb changes inthe external environment as global financing conditions are expected to remaintight and external demand is weakening.

Fiscal and monetarypolicy coordination will be critical to ensure price stability in the contextof accelerating domestic core inflation, it said, adding that a more prudentand prioritised expenditure strategy is needed to ensure investments inhuman capital and resilient and green infrastructure to help bolster economicpotential and resilieꦚnce./.