Private investment saw a considerable decline in the second quarter, primarily attributed to reduced investment in commercial vehicles as financial institutions tightened lending criteria, according to the Finance Ministry.
An internal source indicated that private investment, especially in machinery and equipment, along with land vehicles, faced significant drops during this period.
This downturn was reflected in the decrease in the registration of passenger cars, trucks, motorcycles, and buses, influenced partly by a drop in sales of internal combustion engine (ICE)-powered vehicles.
Furthermore, the automotive loan sector is facing challenges with high levels of debt and overdue payments, resulting in increased loan rejection rates.
The National Economic and Social Development Council (NESDC) reported that overall investment in the second quarter fell by 6.2%, following a 4.2% decline in the first quarter.
Public investment decreased by 4.3% compared to the same period in 2023, primarily due to a 12.8% reduction in government investment, while state enterprise investment increased by 10.1%.
Private investment contracted by 6.8%, contrasting with a 4.6% growth in the first quarter, largely due to declines in construction and machinery investments, which fell by 5.4% and 6.7%, respectively.
The severity of the national investment contraction in the second quarter underscores the need for accelerated investment initiatives in the upcoming quarter to stimulate growth.
The machinery and equipment sector remains a crucial component of the nation’s investment landscape, accounting for 81% of total private sector investment in 2023, while construction investment made up 18.9%.
Overall, the economy grew by 1.9% in the first half of this year, continuing from a 1.6% growth rate in the latter half of last year.
Looking ahead to 2024, the NESDC anticipates the economy to expand between 2.3% and 2.8%, with an average growth forecast of 2.5%.
Private investment is projected to increase by a modest 0.3%, falling below previous growth rates of 2.9%, 4.7%, and 3.2% from 2021 to 2023.
Public investment is also expected to contract by 0.7% for the entire year, although this represents an improvement over last year’s figures.
The tourism sector’s ongoing recovery is expected to be a vital driver for the economy this year, with forecasts of 36.5 million foreign tourist arrivals, rising from 28.1 million in 2023.
Private consumption is predicted to grow robustly, with an anticipated growth rate of 4.5% this year.
Additionally, heightened government spending and investment momentum in the latter half of the year, coupled with a gradual recovery in exports spurred by global trade improvements, is foreseen.
The value of exports in dollar terms is projected to increase by 2% this year, reversing the 1.7% decline experienced last year.
