Private investment contracted significantly in the second quarter, primarily due to a decline in investment in commercial vehicles as financial institutions tightened lending, according to the Finance Ministry.
A source from the Finance Ministry who requested anonymity said private investment, particularly in machinery and equipment, including land vehicles, dropped significantly in the second quarter.
This decline was evident in the reduction in the registration of passenger cars, trucks, motorcycles and buses, driven partly by a decrease in sales of internal combustion engine (ICE)-powered vehicles.
Additionally, high levels of debt and overdue payments in the automotive loan sector have led to an increase in loan rejection rates.
The National Economic and Social Development Council (NESDC) recently reported that overall investment in the second quarter this year fell by 6.2%, continuing from a 4.2% decline in the first quarter.
Public investment decreased by 4.3% compared to the corresponding period of 2023, mainly due to a 12.8% drop in government investment, while investment by state enterprises expanded by 10.1%.
Private investment fell by 6.8%, compared to a 4.6% growth in the first quarter, mainly due to declines in construction and machinery investment, which fell by 5.4% and 6.7%, respectively.
The source said the contraction in national investment in the second quarter was quite severe, making it necessary to accelerate investment in the third quarter to restore growth.
The machinery and equipment category is considered an important segment of the country's investment. In 2023, it accounted for 81% of total private sector investment, while construction investment accounted for 18.9% of total private investment.
According to the NESDC report, the economy grew by 2.3% in the second quarter of this year, improving on 1.6% growth in the first quarter.
For the first half of this year, the economy grew by 1.9%, continuing from the second half of last year, when it grew by 1.6%.
For the entire year of 2024, the NESDC expects the economy to grow between 2.3% and 2.8%, with an average of 2.5%.
Private investment is expected to grow by 0.3%, lower than the growth rates of 2.9%, 4.7%, and 3.2% recorded in 2021, 2022 and 2023, respectively.
Public investment for the entire year is also expected to contract by 0.7%, though it is an improvement from last year. Public investment growth rates stood at 3.5% in 2021, -3.9% in 2022 and -4.6% in 2023, respectively.
The NESDC sees the continuing recovery of the tourism sector as a key supporting factor for the economy this year, with an expected 36.5 million foreign tourist arrivals, up from 28.1 million in 2023.
Domestic consumption is expected to grow well, with private consumption forecast to grow by 4.5% this year.
Additionally, increased momentum from government spending and investment in the second half of the year, along with a gradual recovery in exports driven by global trade recovery, is anticipated.
The value of exports in dollar terms is projected to grow by 2% this year, against a 1.7% decline last year.