Vietnam's economic outlook in 2022 in the eyes of international organizations

Most foreign economic experts are optimistic in their assessment of Vietnam's economic growth prospects this year despite many difficulties in the international environment, including high energy prices.

Optimism about the prospects

The World Bank (WB) has just released an update on Vietnam's economic situation with the title: "Education for growth" with optimistic comments. Accordingly, the World Bank forecasts that Vietnam's economic growth this year will be 7.5% compared to 2.1% last year.

The World Bank (WB) has just released an update on Vietnam's economic situation with the title: "Education for Growth" with optimistic comments. Accordingly, the World Bank forecasts that Vietnam's economic growth this year will be 7.5% compared to 2.1% last year.

WB experts said that despite recent shocks and increased uncertainty, Vietnam's economy has still been on the path to recovery. Over the past six months, the recovery of Vietnam's economy has accelerated thanks to a solid manufacturing and processing sector and a strong recovery in service sectors.

"After strict social distancing and a sharp decline in GDP in the third quarter of 2021, the economy has started to recover from the fall of 2021 thanks to high vaccination rates that facilitate the reopening of the country. By the end of December 2021, about 80% of the population had been fully vaccinated, and travel restrictions were gradually lifted. Thanks to that, the economy recovered quickly, growing at 5.2% in the fourth quarter of 2021, 5.1% in the first quarter of 2022, and 7.7% in the second quarter”, WB experts said.

Forecasting Vietnam's economic prospects this year, WB experts believe that Vietnam's GDP growth will increase sharply from 2.6% in 2021 to 7.5% this year when consumers satisfy the previously pent-up demand and the number of international tourists increases.

Earlier, Singapore's The Business Times also quoted economic experts as saying that Vietnam's economy is on a strong recovery momentum this year.

Mr. John Paul Lech, Investment Director at Matthew Asia Investment Fund, said: "Vietnam is the star of the frontier market."

In his view, although often overshadowed by continental heavyweights like China and India or older emerging markets like Indonesia and Malaysia, Vietnam is one of the best growth markets in developing countries.

Although emerging markets are generally smaller, less liquid, and less likely to access foreign investment, Vietnam is bucking the trend. The evidence is that in the first 6 months of this year, foreign direct investment (FDI) into Vietnam increased by nearly 9% to 10.1 billion USD.

Economist Chua Han Teng of DBS, Singapore's largest bank, also has an optimistic perspective that Vietnam's GDP growth this year will reach 7%, meeting the set target. In particular, the service sector will continue to grow strongly. Retail activity will recover across all sectors. The number of newly established enterprise registrations is increasing.

There is also an optimistic assessment of Vietnam's economy in 2022, HSBC Bank said that Vietnam is one of the fastest growing countries in the region this year.

In a recent report, HSBC analysts suggested that Vietnam is a rare country that has maintained growth for two consecutive years since the pandemic and is currently considered a bright spot in the region, due to its solid economic development potential and the ability to recover quickly after the Covid-19 pandemic.

Total retail sales of consumer goods and services in the first 6 months increased by 11.7% over the same period last year. Industrial production continued its steady growth momentum with a rate of 8.48% of the whole industry over the same period in 2021, of which mobile phone components increased by 22.2%. The manufacturing PMI rose from 51.7 points in April to 54.7 points in May, the highest level in the past 12 months, before retreating slightly to 54 points in June.

Thanks to stable FDI capital for many years pouring into the technology manufacturing industry, Vietnam has grown to become a manufacturing factory of the world. Export growth in the first 6 months increased by 17.3% over the same period last year.

This optimism was underpinned by Vietnam's GDP growth in the second quarter was higher than expected, with an increase of 7.7% year-on-year—the highest in 11 years and well above the earlier estimate of 5.9% by economists. This strong recovery was fueled by manufacturing activity, which accelerated for the fourth consecutive quarter, and a recovery in services output that has continued to regain ground since the last decline in the third quarter of 2021

In this regard, Mr. Chua Han Teng also said that Vietnam is emerging as a strong exporter of information and communication technology and that its market share is likely to grow further.

In the first 6 months of the year, the whole country had 76,200 newly registered enterprises, up 13.6% over the same period last year and nearly 40,700 enterprises returned to operation, up 55.6%. On average, there are 19,500 newly established enterprises returning to operation a month. This shows that business activities are starting to prosper and become vibrant again.

In particular, the full reopening from mid-March played a very important role in the recovery of the service industry. In the first half of the year, Vietnam welcomed 602,000 international visitors, 6.8 times higher than at the same period last year.

These signs all show that Vietnam is on a steady and steady recovery. Therefore, HSBC has raised its growth forecast for the whole year to 6.9% (from 6.2% and 6.6% previously). Vietnam's growth rate is likely to lead the region’s.

Similarly, Singapore's UOB also raised its growth forecast from 6.5% previously to 7% assuming no further strict disruptions caused by the pandemic.

Standard Chartered Bank recently also forecast that Vietnam's GDP growth in the third quarter will reach 10.8% and that for the whole year will reach 6.7%.

Mr. Tim Leelahaphan, the economist in charge of Thailand and Vietnam at Standard Chartered, said that the economic recovery will take place strongly in the second half of the year, especially when the tourism sector has been reopened after 2 years of closure. According to him, at the moment, the inflation situation is still under control.

In its latest report released at the end of July, the Asian Development Bank (ADB) also maintained its forecast for Vietnam's economic growth at 6.5% this year and 6.7% in 2023, while lowering its Asia growth forecast to 4.6%.

Noticeable risk

Although the growth outlook is very positive, WB experts also note the growing risks that threaten the recovery prospects of the economy. Those risks include slowing growth or stagnant inflation in key export markets, continued world commodity price shocks, disruptions to global supply chains, or the emergence of new strains of COVID-19.

In addition, the WB said that there are domestic challenges, including labor shortages, rising inflation risks, and higher risks in the financial sector.

Speaking to The Business Times, economist Yun Liu said that despite the positive growth momentum, the energy crisis has begun to affect Vietnam's growth. Therefore, Vietnam needs to be aware of the increased risks to growth, especially from rising energy prices.

Sharing the same view, Mr. Ngo Dang Khoa, Country Director of Foreign Exchange, Capital Markets and Securities Services Division, HSBC Vietnam, also said that Vietnam is facing a series of challenges in the context of rising world fuel prices. high. That will cause fuel costs to increase, adversely affecting Vietnam's trade balance.

“We evaluated this trend to continue, putting downward pressure on inflation. Despite high energy costs, moderate food inflation, and relatively stable domestic production, they help to contain total inflation," said HSBC experts.

Besides, HSBC experts said that Vietnam needs to pay close attention to the "counterwinds" that hinder trade growth, which is getting stronger. On the one hand, world consumption is shifting from goods to services. On the other hand, supply chain disruption in China makes it increasingly difficult for Vietnamese manufacturing enterprises to secure input materials for export activities in the future. These are the factors that make it difficult for Vietnam's export growth to maintain the current strong growth momentum.

However, the World Bank believes that the recovery process of Vietnam's economy has just begun while the outlook for global demand is weakening and inflation risks are increasing. Therefore, the WB recommends that the competent authorities take the initiative to respond.

Recommendations

Regarding fiscal policy, the WB recommends that the focus should be on the implementation of the policy package to support economic recovery and development and, at the same time, expand the targeted social safety net to help poor and vulnerable people withstand the impact of fuel price shocks as well as rising inflation.

In the financial sector, the World Bank's report recommends that it is necessary to closely monitor and strengthen reporting and provision for bad debts and at the same time issue a mechanism to deal with insolvency.

Vietnam’s Director of the World Bank, Carolyn Turk, also said that to maintain economic growth at the desired rate, Vietnam needs to increase productivity by 2-3% per year.

"International experience shows that increasing labor productivity can only be achieved by investing in the education system." "A competitive workforce that will bring productivity is what Vietnam needs in the long term," the Director of WB Vietnam emphasized.

In addition, according to Mr. Khoa, Vietnam should approach the international capital market for green development, taking advantage of the interest of the capital market and the investor's taste in a favorable direction.

Source : Dantri