Vietnam’s Economy Back on Track for Strong Recovery: Economists

For the first six months of 2022, foreign direct investment (FDI) into Vietnam grew by nearly 9% to USD10.1 billion. Photo: Investment Review

John Paul Lech, portfolio manager at Matthews Asia, said Vietnam is a frontier market star. While frontier markets are generally smaller, less liquid and have limited foreign investor access, it has bucked the trend.

For the first six months of 2022, foreign direct investment (FDI) into Vietnam grew by nearly 9% to USD10.1 billion.

Economist Chua Han Teng from DBS, the largest bank in Singapore, forecast Vietnam’s GDP expansion will reach 7% this year to meet the set target.

He held that the service sector will continue growing fast when COVID-19 is classified as an endemic disease. The service sector, especially retails, is bouncing back strongly while the number of new businesses is increasing.

He added Vietnam is emerging as an exporter of information and communications technology, and its market share may develop further.

Containers are loaded at Hai Phong Port. Photo: VNA

The United Overseas Bank (UOB) recently upgraded the country’s GDP growth forecast for 2022 to 7% from 6.5% basing on a simulation that there won’t be any more serious disruptions caused by the pandemic.

The optimism was supported by a higher-than-expected GDP growth rate in the second quarter, at 7.7% compared to the same period last year - the fastest pace in 11 years and much higher than the previous estimate of 5.9%. This strong recovery was driven by manufacturing activities which have accelerated for four straight quarters and the rebounded service outputs which have continued regaining its foothold since the last decline in the third quarter of 2021.

However, economist Yun Liu said despite an optimistic growth trend, the energy crisis has begun affecting Vietnam’s growth, recommending the country pay attention to rising growth risks, especially those posed by soaring energy prices.

Earlier, Bloomberg also said Vietnam’s economic growth accelerated faster than expected in the second quarter of this year, as a recovery in exports and manufacturing helped offset risks from coronavirus outbreaks and rising oil prices, Bloomberg reported.

The US-based news agency cited data from the General Statistics Office of Vietnam (GSO) saying the Vietnamese economy expanded 7.72% year-on-year in the April-June period, compared to 5.05% of the previous quarter.

That was quicker than the median estimate for a 5.9% gain in a Bloomberg survey, and the highest level since at least the first quarter of 2013, it said.

Residents observing social distancing while waiting outside a take-away eatery in Ho Chi Minh City last October, following the easing of strict Covid-19 coronavirus curbs that had been in place for the preceding 3 months. Photo: AFP

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.

The economy also benefited from fiscal stimulus worth about VND347 trillion

(USD15 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. “Nevertheless, the authorities should be vigilant about inflation risks associated with continuing rise in prices of fuels and imports,” it said./.

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