A rebound in domestic consumption demand and surge in exports are expected to be drivers for Viet Nam’s economic growth in 2022.
|Goods are gathered at Cat Lai Port to prepare for export.|
Many international organisations have been upbeat about the recovery of the Vietnamese economy. Among them, Fitch Ratings gave the most optimistic view as it expected the country’s economy to grow by 7.9 per cent in 2022 and 6.5 per cent in 2023 in its recent report.
Fitch’s forecast is higher than the growth target set by the Vietnamese Government (6-6.5 per cent) and other institutions such as the World Bank (5.5 per cent) and the Asian Development Bank (6.5 per cent).
According to Fitch, Viet Nam’s recovery is set to gather momentum this year, as domestic demand rebounds and export performance remains strong.
“We expect goods demand growth to decelerate in the developed world in 2022 as activity normalises and services demand picks up. However, Viet Nam’s export sector should remain a regional outperformer, benefitting from its cost competitiveness, diversion of trade from China and a variety of key trade agreements,” Fitch stated.
In fact, exports have been a major driver of Viet Nam’s growth for many years. Despite adverse impacts of the COVID-19 pandemic, Viet Nam’s export turnover last year reached more than $336.3 billion, up 19 per cent over the previous year. As exports grew faster than imports, the country last year had a trade surplus of $4.08 billion.
According to ADB Principal Country Economist for Vietnam Nguyen Minh Cuong, free trade agreements Viet Nam has signed over the past two years will open up lots of opportunities for the country to access different markets, which will facilitate the development of domestic production of the industry, agriculture and service sectors.
The latest report of London-based information provider IHS Markit also showed the Vietnam Manufacturing Purchasing Managers’ Index (PMI) rose to 53.7 in January 2022 from 52.5 in December 2021. It signals a solid improvement in business conditions that was the most marked since April last year. Both output and new orders increased at a high rate in the opening month of the year as customer demand continued to rise. Experts attributed the improvement in total new orders to foreign enterprises’ activities, with the fastest growth rate since November 2018.
Under IHS Markit’s report, the companies are also confident in the production outlook for 2022. About 60 per cent of respondents expected an increase in output, reflecting the highest level of optimism in the past three years.
Andrew Harker, Economics director at IHS Markit, said: “Vietnamese manufacturers made a positive start to 2022, with the absence of any widespread restrictions meaning that the sector was able to grow despite relatively high COVID-19 case numbers. Firms were also increasingly confident about the year-ahead outlook.”
Besides the positive signals in the country’s export and domestic consumption demands, services and tourism are also considered new drivers for the country’s growth in 2022 after two years of interruptions.
The Vietnamese Government has announced a roadmap to reopen the tourism industry under new normal conditions from March 15 this year while international flights have also started to resume.
The factors are important for tourism and investment to recover, creating a foundation for economic recovery, experts said.
However, Deputy Minister of Planning and Investment Tran Quoc Phuong noted Viet Nam would have to rely on all fields from industry, agriculture, services and tourism to public investment to revive its economy.
The country therefore would have to drastically implement measures set out in Resolution No. 01/NQ-CP and Resolution No. 11/NQ-CP about programmes on socio-economic recovery and development to turn the drivers into reality.
Improving the business environment and enhancing competitiveness are priorities in the tasks assigned by the Government to ministries and agencies in 2022. This is a necessary addition to the recently approved economic growth and recovery plan.
The Vietnamese economy will recover strongly in 2022, starting at the end of the first quarter, said Tim Leelahaphan, Economist for Thailand and Vietnam at Standard Chartered.