Vietnam’s economy faces strong headwinds amid slowing local and external demand, the World Bank said in a report on Wednesday.
Rising inflation and tightening domestic financial conditions could affect domestic demand during the next months, the Vietnam Macro Monitoring report forecasted.
As the U.S. Federal Reserve is expected to continue raising interest rates, Vietnam could consider allowing further flexibility in the exchange rate, including through a quicker pace of depreciation of the reference rate, the report said.
It also noted that weaker demand contributed to Vietnam’s moderated industrial production growth, slowing retail sales, and slowdown in export growth in October.
Meanwhile, a fast rise in food prices was a driver of accelerating inflation in the month, the report said, adding that the Consumer Price Index (CPI) inflation rose 4.3 percent in October, exceeding the 4 percent target for the first time since April 2020.
