Foreign investment in Vietnam has shown stable growth

According to the World Bank, foreign direct investment (FDI) commitments to Vietnam reached $ 11.07 billion as of the end of May 2023, up more than 2% compared to the same period last year. The World Bank assesses that the majority of FDI continues to be concentrated in the manufacturing and real estate sectors. Cumulative FDI disbursement also reached $ 8.3 billion, an increase of 7.8% compared to the same period in 2023.

The report also indicates that while overall inflation remained unchanged, core inflation slightly decreased. The Consumer Price Index (CPI) increase rate in May remained at 4.4% compared to the same period last year, consistent with April. Food and housing continue to be the primary drivers of inflation.

Although retail sales increased in May compared to the previous month, data compared to the same period last year shows that consumer demand remains weak.

In May 2024, retail sales increased by 1.2% compared to April, driven by improved retail sales of goods (in April 2024, this index was -0.3%). Compared to the same period last year, retail sales increased by 3.3%, whereas May 2023 recorded an increase of 8.1% compared to May 2022.

Industrial production saw strong growth in May due to improved exports. The Industrial Production Index (IIP) in May 2024 increased by 2.6% compared to the previous month. Compared to the same period last year, IIP increased by 8.9% compared to the 0.5% recorded in May 2023, due to higher export volumes and a low base effect from the previous year.

Meanwhile, the exchange rate continued to face pressures, with average overnight interbank interest rates remaining high in May 2024, reflecting the State Bank of Vietnam's continued liquidity tightening policy.

The World Bank believes that amidst recovering global demand but still weak domestic demand, especially in consumption, and with the USD strengthening, reducing interest rates to support investment could increase pressure on the exchange rate. Therefore, Vietnam needs to consider continuing to support overall demand through investment spending.