There are concerns that Vietnam’s economic growth may slow this year and that it may not meet its economic growth target. In particular, a warning light has been turned on that the real estate market is following in the footsteps of China, which is suffering from liquidity problems.
According to Bloomberg and the Financial Times (FT) on the 28th, Vietnam may not reach its GDP growth target of 6.5% this year. The Vietnam’s economic growth has continued to grow, but it entered a recession as the global economy slowed down due to the economic structure that is highly dependent on exports. Exports fell for the fifth consecutive month until July, marking the longest slump in 14 years. The GDP growth rate in the first half of this year was 3.72% which was the slowest growth rate in the past decade except in 2020 and 2021, when the world was hit by COVID-19.
Job conditions are also bad because of high inflation, austerity, and worsening global economy. According to Vietnam’s Ministry of Labor, 280,000 workers were laid off in the first five months of this year. The textile and clothing industries had the largest number of layoffs, with 70,000 layoffs. Electronic components (45,000 people) and shoe manufacturing (31,600 people) followed.
Even the real estate market is shrinking. According to the FT, international bonds issued by Vietnam’s largest real estate developers recently traded at less than half of their issuance. The $100 million Nova Land bond due 2026 fell to 32 cents per dollar, while the $200 million BIM Land bond due in the same year fell to 52 cents per dollar.
This was largely due to the Vietnamese government’s limited leverage (debt) and anti-corruption crackdown last year. Since the arrest of real estate tycoon Tsoong Mi-ran last year, a bank run (mass withdrawal) has occurred at Saigon Commercial Bank, and the aftermath is still affecting real estate bonds, FT said. Bond prices have plummeted, leading small developers and real estate groups to face bankruptcy, and thousands of construction projects have been suspended. Real estate demand also plunged as more investors doubted the developer’s ability to raise funds.
