Bloomberg: Vietnam’s Economic Growth Accelerates on Exports, Manufacturing

Vietnam’s economic growth accelerated faster than expected in the second quarter of this year. Source: vneconomy

Bloomberg cited the General Statistics Office (GSO) as saying that gross domestic product rose 7.72% in the April-June period from a year earlier, faster than a revised 5.05% in the first quarter.

That’s quicker than the median estimate for a 5.9% expansion in a Bloomberg survey of economists.

The performance helped lift growth in the first-half to 6.42% from a year ago, beating the GSO’s forecast for a 5.5% pace. The government targets full-year growth at 6%-6.5%.

The gains in momentum coincide with Vietnam emerging as one of the alternative destinations for foreign investment amid trade disruptions from China’s lockdowns, the war in Ukraine and lingering tensions between Beijing and Washington.

Vietnam's gross domestic product rose 7.72% in the April-June period from a year earlier, faster than a revised 5.05% in the first quarter. Photo: Bloomberg

The economy also benefited from fiscal stimulus worth about VND347 trillion ($15 billion), and an easy monetary policy that makes the State Bank of Vietnam one of the last few to resist the global tightening cycle.

“The economic recovery remained strong despite heightened global uncertainties,” the World Bank said in its June report on Vietnam.

Industrial production continued a robust expansion of 10.4% year-on-year while retail sales rebounded with growth of 4.2% month-on-month and 22.6% year-on-year, suggesting strong recovery of private consumption.

About 173,000 international visitors arrived in May, about 70% higher than in April and the highest figure since April 2020, yet still less than 16% of pre-pandemic levels.

Sales of consumer services, which were hit harder than the sales of goods last year, experienced a stronger rebound (41% year on year compared to 18.3% year on year, respectively).

The economy also benefited from fiscal stimulus worth about VND347 trillion ($15 billion). Photo: VNA

The rebound was due to the booming accommodation and catering services, which increased by nearly 70% and were 12.4% higher its pre-pandemic level three years ago. Travelling also tripled compared to a year ago although it was about 60% lower than its pre-pandemic level.

The WB also recommended that Vietnamese authorities should be vigilant about inflation risks associated with continuing rise in prices of fuels and imports, which may dampen the ongoing recovery of domestic demand. Temporary support including targeted transfers should be considered to help poor households weather the price surge.

As the commodity price shock appears to be mainly affecting oil and fuels, with passthrough to transport costs, temporary targeted subsidy for main gasoline and fuel users (such as truckers) could also be considered to alleviate hardship and blunt the inflationary pressures.

Investing in alternative energy production would reduce the economy’s dependence on imported fuels in the medium term and promote greener growth./.

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