Vietnam Ecomomy * 2022 Forecast

Luu Nguyen Staff

Written by Thinh Luu

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Vietnam Economy * 2022 Forecast

NDO – With trade and domestic production bouncing back despite negative impacts of the health crisis, the government is making its great efforts to continue reviving the economy, which is expected to take the lead in the region in growth this year.

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“Consumers throughout the region of Southeast Asia are living increasingly fast-paced lives, and this lifestyle shift is driving increasing demand for on-the-go offerings,” Vaughan Ryan, Nielsen’s Managing Director in Southeast Asia, said.

Prime Minister Pham Minh Chinh has signed and enacted Official Telegram No.126/CD-TTg sent to ministers, heads of ministerial agencies, government agencies, and chairpersons of people’s committees of centrally managed provinces and cities. PM Chinh requests them to roll up their sleeves to implement the country’s Program drastically and effectively on Socio-economic Recovery and Development promulgated nearly two weeks ago.

“They must proactively review and remove or propose authorize agencies to phase out all obstructions for domestic production and business activities,” the telegram stated. “They must also accelerate the removal, reduction, and simplification of administrative procedures for a more business-friendly climate. The procedures must be increasingly processed online, while innovation is strongly encouraged with the boost of digital transformation, development of a digital economy, a green economy, and a circular economy closely connected with sustainable development.”

In fact, over the past year, many experts and the government have assessed that the economy has reaped a series of encouraging outcomes since 2021, especially in the context of the COVID-19 pandemic raging worldwide, heavily affecting the Vietnamese economy, which has seen a large part of its population vaccinated.

“Thanks to the government’s flexible policies on controlling COVID-19 and ensuring social security, and the great consensus and solidarity of all units, agencies, and localities, as well as the sharing and support of enterprises and all people from all walks of life, economic activities since the fourth quarter of 2021 have been bouncing back,” said the General Statistics Office’s (GSO) general director Nguyen Thi Huong.

For example, in January 2022 when preparations for the Tet holiday took place and caused a slowdown to production activities, the manufacturing and processing sector which creates more than 80% of the economy’s industrial growth increased 2.8% on-year, while the electricity production and distribution sector climbed 5.1%. The sector of water supply and waste management and treatment expanded 1.2% as compared to that of the same period last year.

Several key sectors enjoyed a high on-year rise included exploitation of ores and metal (21.9%); products from fabricated metal (16.8%) excluding machinery and equipment; clothes (11.4%), electricity equipment (11.5%); leather and leather-based products (11.3%), textiles (8.8%), and other manufacturing and processing products (15.3%).

According to the GSO, the growth rate for the whole 2021 is estimated to sit at 2.58% – with the rates of 4.72 and 6.73% for the first and second quarters. It declined by 6.02% in the third quarter due to serious resurgence of COVID-19 which heavily affected the economy’s all sectors and drove hundreds of thousands of enterprises into halted production and business. After that, the economy is estimated to expand 5.22% on-year in the last quarter of 2021, higher than the on-year 4.61% in the corresponding period last year.

Showing its optimism over the Vietnamese economic outlook, the World Bank said in its December 2021 bulletin that, in the country, “Economic conditions continued to improve. Both industrial production and retail sales registered a third month of growth,” said. “Merchandise exports hit a record high of 34.5 billion USD in December, helping maintain a third consecutive month of trade surplus while foreign direct investment (FDI) commitment recovered after a brief dip in October.”

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Ho Chi Minh City - the city pitches itself as regional economic & financial hub after the health crisis in late 2021

Trade Recovery

Deputy Minister of Industry and Trade Nguyen Sinh Nhat Tan said that in 2022, his ministry will continue working with localities to tap into and take advantage of free trade agreements in order to develop markets and remove impediments for enterprises.

“We will continue implementing activities about trade promotion, while keeping close eyes on markets in order to determine what types of goods we will export to now and in the coming time,” Tan said. “Also, to win in the new markets, enterprises should diversify their product portfolio and improve their product competitiveness, as well as have sound strategies on brand name development.”

According to fresh figures from the General Department of Vietnam Customs, in January 2022, total export turnover of Vietnam hit 30.84 billion USD, an on-year climb of 8.1%. Total import turnover reached 29.45 billion USD, up 11.3% as compared to that in the corresponding period last year. All of these resulted in a trade surplus of 1.39 billion USD.

Last October, the total export-import turnover hit 55 billion USD, up 2.4% over September, with a trade surplus of 2.74 billion USD. In November, the figure rose to 59.7 billion USD, with a trade surplus of 100 million USD, and in December, the figures touched 66.5 billion USD and 2.54 billion USD, respectively.

The total export-import value for the entire 2021 reached 668.5 billion USD, up 22.6% on-year. In which the export and import values totaled 336.25 billion USD and 332.25 billion USD, up 19 and 26.5% over those of 2020, respectively. The total trade surplus stood at 4 billion USD for last year.

In the last quarter of 2021, the number of newly established businesses touched over 31,400 registered with 18 billion USD, employing 205,100 new laborers. This was a climb of 70.4% in the number of enterprises, 64.1% in capital, and 24.7% in laborers.

“Thus, just two months of carrying out the government’s Resolution No.128/NQ-CP dated October 11 on provisional guidelines on safe adaptation to the COVID-19 pandemic, businesses’ business registration in the remaining months of the year has flourished,” said Huong of the GSO. “In January 2022, a big signal in enterprise establishment was also seen.”

Specifically in the month, the economy saw 13,000 newly established enterprises registered at 8.36 billion USD, using nearly 77,100 new laborers. As compared to last December, this was up 15.9% in the number of enterprises, 22.6% in capital, and 10.5% in labor. However, as compared to the same period last year, this was up 28.9% in the number of enterprises, 24% in capital, but down 33.5% in labor.

“These statistics show that the current hardships are just temporary, and that the Vietnamese economy, with its solid macroeconomic foundation and stable major balances, is still capable of offering vast potential, advantages, and drivers for future growth,” PM Chinh stressed.

Bullish Predictions

Commenting on Vietnam’s economic outlook, Suan Teck Kin and Peter Chia, economists at United Overseas Bank, said that they lowered Vietnam’s growth forecast to 6.8 per cent (from 7.4 per cent) for 2022 against 2.6 per cent in 2021, versus the official projection of 6.0 per cent – 6.5 per cent. It should be noted Vietnam is still in a favorable position to capture upside potential considering the low bases in 2020 and 2021, the strength of its external sectors, as well as the opportunities of the domestic sector adding to this growth momentum.

Dhiraj Nim and Khoon Goh, economists at ANZ, are slightly more optimistic, saying that their forecast for 2022 GDP growth is at 8 per cent, higher than the market consensus. There is a large degree of uncertainty surrounding our growth forecast. Achieving it is dependent on the strong growth momentum at the end of 2021 carrying over into early 2022, and the absence of further tightening in restrictions as the country moves to an endemic strategy for dealing with the COVID-19 pandemic.

Global analysts Focus Economics said that, industrial production is projected to accelerate this year from 2021’s average level, as the pandemic abates and associated restrictions are eased. Moreover, the underlying strength of Vietnam’s industrial sector remains intact: Vietnam is an attractive low-cost base for manufacturing firms, including those looking to relocate from China due to the US-China trade tensions.

“Our panelists estimate that industrial output will grow 8.4 per cent in 2022, and 8.7 per cent in 2023,” Focus Economics said.

The Asian Development Bank assumed that if COVID-19 is controlled and full vaccination covers 70% of the population by the second quarter of 2022, the Vietnamese economy may grow 6.5% this year.

The World Bank also predicted that the economy could expand by 6.5 to 7% from 2022 onward.

This new projection also assumed that COVID-19 must be controlled, allowing the economy to recover, which will also be supported by the acceleration of the vaccination program.

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