Two women work at the Saigon Hi-tech Park in HCMC. Vietnam’s industrial production index in April rose 24.1% compared with the same period last year – PHOTO: VNA

HCMC – Vietnam’s industrial production index increased by 1.1% month-on-month and 24.1% year-on-year in April thanks to robust external and recovering domestic demand, according to the World Bank’s “Vietnam Macro Monitoring May 2021” report.

The high year-on-year growth rate was to a large extent due to the low base effect as production was hit hard by the Covid-19 pandemic-related lockdown in April 2020.

The continued expansion also reflected recovering domestic consumption in addition to solid external demand for hi-tech manufacturing products.

The most dynamic sub-sectors included beverage, clothing, home appliances, basic metals, electronics, computers, optical products and machinery.

Industrial production continued its solid expansion, while retail sales rebounded after two consecutive months of decline.

Retail sales grew by 2.3% month-on-month in April, reflecting the partial recovery of consumer demand from the third outbreak of Covid-19 in late January 2021. This rebound was driven by a 1.9% increase in the sales of goods, while services grew by 3.8%. However, the overall sales were still lower than in January.

The report also showed that merchandise trade continued to perform exceptionally well, driven by robust demand from the United States and other major trading partners.

The expansion of goods exports eased slightly by 3.4% month-on-month while imports continued to grow by 2.6% in April.

Over the first four months of 2020, exports and imports grew by 26% and 31% year-on-year, respectively. Trade expansion was fueled by the recovery in the U.S. and China and to a lesser extent by the EU, ASEAN and South Korea.

Credit to the economy grew by 2% month-on-month, reflecting increased demand for credit as businesses responded to the stronger consumer demand during the national holidays in late April and early May.

The average overnight interbank interest rate also increased from 0.29% in March to 0.48% in April.

The consumer price index increased by 0.5% month-on-month, mainly driven by higher prices of consumer goods, including food, beverage, clothing, household supplies and appliances. This reflected the recovery of household consumption from the third local outbreak of Covid-19.

Prior to the fourth Covid-19 wave, which started in late April, mobility was improving fast, but it is deteriorating again with the new restrictions.

During most of April, most mobility indicators improved significantly as the third Covid-19 outbreak was brought under control. They also spiked at the end of the month as Vietnamese celebrated the second-longest national holidays in observance of National Reunification Day and International Labor Day. However, such indicators are deteriorating in May due to stronger mobility restrictions.

The World Bank warned that domestic economic activities will be affected by the fourth Covid-19 wave, especially those in sectors such as tourism, transport and retail, depending on the magnitude of the outbreak and how quickly the Government will be able to bring it under control.

The Government should consider boosting domestic demand by adopting a more accommodative fiscal policy, including increasing its support to the affected businesses and people.