Vietnam's industrial production remains steady growth amid Covid pandemic

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The index of industrial production (IIP) in May was estimated to have increased 1.6% compared to the previous month and 11.6% over the same period last year, announced by the General Statistics Office.

In May, the processing and manufacturing industry saw an expansion of 14.6% over the same month of last year. The electricity production and distribution expanded 12% and water supply and waste treatment grew by 6.8%. Meanwhile, the mining industry saw a decrease of 9.8%.

The IIP in May still grows despite the Covid-19 pandemic. (Photo: TTXVN)

In addition, the IIP in the first five months of this year soared 9.9% over the same period last year, with processing and manufacturing in the lead with an increase of 12.6%.

Electricity production and distribution and water supply and waste treatment industries witnessed respective increases of 8.3% and 7.5% during this period. The mining posted a decrease of 7% in its production index in the first five months.

Surging production and trade

According to the General Statistics Office (GSO), in April, Vietnam's index for industrial production (IIP) increased 24.1% year-on-year "thanks to the effective control of Covid-19 and of free trade agreements helping stimulate local production," in which the manufacturing and processing sectors created 80% of industrial growth, ascending 29.1% year-on-year.

The government has been controlling COVID-19 well, facilitating a surge in industrial production in turn fueling economic growth. (Photo: NhanDan Online)

The most dynamic sub-sectors include beverages as businesses are ramping up production to serve domestic demand in the summer. The manufacturing of metals, electronic components, electrical equipment, machinery, and motor vehicles also grew thanks to strong external demand. The Purchasing Managers' Index (PMI) index rose from 51.3 in February to 51.6 in March, confirming the continued expansion of manufacturing.

In the first four months of 2021, the IIP climbed 10% year-on-year, in which the manufacturing and processing sector expanded 12.7% year-on-year - higher than the 9.7% year-on-year rise during the same period last year.

"After last year's slowdown, industrial production is projected to gain momentum on the back of returning demand from key international partners. Despite the ongoing COVID-19 pandemic, 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 US-China trade tensions," said Spain-based FocusEconomics, which provides in-depth economic analysis globally, in its May report sent to Nhan Dan Online. "That said, a sluggish rollout of the vaccine, coupled with an uncertain development of the pandemic, pose a risk to the positive outlook."

Expecting higher economic growth

FocusEconomics wrote in its May report, sent to Nhandan Online, that looking ahead, economic recovery should gather pace later in 2021, with the second quarter's results projected to be significantly higher than in the first quarter of the year. However, the still-high infection rates in Europe and the US and the associated limitations on international travel cloud the positive outlook somewhat.

Photo: VNA/VNS

Regarding the outlook, Dhiraj Nim and Khoon Goh, economists at ANZ, commented, "Vietnam's first-quarter GDP print may have partly dampened the optimism regarding its economic recovery in 2021. However, we believe that the economy's upward growth trajectory remains intact, and even at our revised 7% growth forecast, the recovery will be robust. In fact, the economic climate had started to improve by the end of the first quarter, and the second quarter is likely off to a solid start. However, further Covid-19 outbreaks and the slow vaccination rollout remain the key downside risks in our view. Inflation, on the other hand, is certain to accelerate meaningfully, and will attract greater policy focus this year and the next."

FocusEconomics Consensus Forecast panelists expect Vietnam's GDP to expand 7.1% in 2021, and 6.8% in 2022.

According to the GSO, in the first four months of 2021, the economy saw nearly 44,200 newly-established enterprises with a total registered capital of VND627.7 trillion (US$27.3 billion), employing 340,300 laborers - up 17.5% in the number of enterprises, 41% in the capital, and 7.8% in the number of laborers as compared to those in the same period of last year.

In particular, the average registered capital of each newly-established business in the first four months of the year was VND14.3 billion (US$617,400), up 20% on-year. If an additional VND792.9 trillion (US$34.47 billion) registered by 14,900 operational enterprises is included, the total registered capital inserted into the economy in the period is VND1.42 quadrillion (US$61.74 billion).

Furthermore, the first four months also saw 19,300 enterprises resume operations, up 8% year-on-year.

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