Best-Case Scenario: HCMC's Growth Projected at 7%

Ho Chi Minh City’s Chairman, Phan Van Mai, has stated that even in the most favorable conditions, the city’s Gross Regional Domestic Product (GRDP) growth is expected to reach nearly 7% this year, despite lingering economic difficulties. In the first six months, the city recorded a 3.55% GRDP growth, with public investment and services serving as the main drivers, according to Mai during a meeting on Thursday. Public investment disbursement reached over VND14 trillion ($593.62 million), a 2.3-fold increase compared to the previous year.

Economist Tran Du Lich noted that the economy experienced a low point in the first quarter with a growth rate of 0.7%, but rebounded strongly in the second quarter with a 5.87% expansion. The city’s industry grew by 2.59%, surpassing the country’s rate of 0.44%. However, analysts express concerns that HCMC may face obstacles in achieving its growth target of 7.5-8% this year. Le Thi Huynh Mai, Director of the city’s Department of Planning and Investment, mentioned that global economic uncertainties and tightened monetary policies from major economies could impact the city, which is already grappling with challenges in the ailing property sector.

Lich forecasted that in the second half of the year, the city might achieve 8% growth, but it would not be sufficient to compensate for the low rate recorded in the first six months. He suggested that the year of accelerated recovery, originally planned for 2023, might need to be postponed to the following year. Businesses in the city continue to face difficulties, with export companies experiencing a shortage of 30-50% in orders. Footwear, garment, wood, and furniture companies have witnessed significant declines in revenues ranging from 30% to 50% year-on-year. A survey conducted by the HCMC Business Association reveals that 95% of its members are reporting losses and high levels of unsold inventory. Businesses require capital due to disrupted cashflow, and bureaucracy has slowed down their recovery process.

The HCMC Institute for Development Studies has proposed increased public spending to stimulate the economy, suggesting the issuance of promotions to boost spending. The HCMC Business Association has proposed extending the 2% value-added tax (VAT) rebate throughout 2024, rather than limiting it to this year only. Chairman Mai assured that the city is actively working to reduce bureaucracy.