The rebound in domestic consumption demand and strong export growth will be the driving force for Vietnam’s economic growth in 2022. Another important driver is the recovery of the service and tourism sectors.
There are many forecasts and actual developments showing that the Vietnamese economy is on the way to recovery, but perhaps Fitch Ratings is an organization with the most optimistic view of the Vietnamese economy. In a recent report, it said that Vietnam’s economy will grow by 7.9% in 2022 and 6.5% in 2023.
The forecast is much higher than the growth target set by the Vietnamese Government, as well as the forecasts of the World Bank (WB) and the Asian Development Bank (ADB). The basis for Fitch Ratings forecast is the recovery of domestic demand and strong increase in export activities.
“Vietnam’s export will continue to outperform the region, benefiting from cost competitiveness and a number of major trade agreements,” said Fitch Ratings.
In fact, for many years now, exports have been a major driver of growth. In 2021, Vietnam’s export turnover reached over $336.3 billion, up 19% over the previous year, despite the impact of the Covid-19 pandemic. Exports grew faster than imports, so last year, the trade balance had a surplus of $4.08 billion.
“The free trade agreements that Vietnam has signed have opened up a lot of opportunities for access to Vietnam’s export markets. Those market access opportunities will facilitate the development of domestic production from industry, agriculture to services,” said Nguyen Minh Cuong, ADB Chief Economist in Vietnam.
According to a report by market research firm IHS Markit, Vietnam’s Purchasing Managers’ Index (PMI) in January 2022 reached 53.7 points, higher than the previous month and this is the highest level within the past 9 months. This figure represents a strong economic recovery since the 4th outbreak of epidemic in Vietnam.
“Vietnamese manufacturers have had a positive start to 2022 when there are no longer wide-ranging restrictions. This is the factor from which the manufacturing sector can grow, despite the relatively high number of Covid-19 cases,” said Andrew Harker, chief economist at IHS Markit.
Expectations in service, tourism
Services and tourism are considered as new growth engines in 2022. What makes foreign investors excited is that the Vietnamese Government has announced a roadmap to reopen the tourism industry and remove restrictions on entry.
Vietnam will completely reopen tourism activities under new normal conditions from March 15. International flights have also resumed and these are important factors for tourism and investment to recover, creating a foundation for economic recovery.
“We encourage the Government to go further and faster in reopening so that Vietnam can realize its full potential as a leader in the tourism sector,” EuroCham said.
Meanwhile, the British Business Association said that one of the key factors for the recovery of the economy is the reopening of borders along with a set of national entry rules and regulations to allow businessmen and tourists to return to Vietnam safely.
However, Deputy Minister of Planning and Investment Tran Quoc Phuong said that not only one driving force can revive the economy. “We must rely on all fields of industrial production, agriculture, services, tourism, public investment, and the demand of the economy,” he said.
Appreciating the implementation of a support package of VND 350,000 billion by the Government of Vietnam to restore and develop the economy in 2022-2023, foreign investors said that the business community is very much looking forward to this sound monetary policy, as well as support from the Government, so that companies and the economy can quickly return to pre-pandemic growth and development.
The year 2022 will not only be the time to live with but overcome the Covid-19 pandemic with a proactive attitude.
In the early days of 2022, foreign capital inflows into Vietnam showed many positive signs. After a year of strong withdrawal in the stock market, the cash flow is forecast to be more positive in 2022.