Optimistic forecast

Growth in 2022 is forecast to reach 6.5 percent, with expanding vaccination coverage possibly further accelerating the GDP growth, according to the latest Asian Development Outlook Supplement. Meanwhile, the Hong Kong and Shanghai Banking Corporation Limited’s (HSBC) Global Research predicted that Vietnam would achieve 6.8 percent growth in 2022 thanks to increased foreign direct investment (FDI). With a pickup in domestic demand driven by the relaxation of restrictions, core inflation in November increased 0.11 percent and was up 0.58 percent year-on-year but still remained within the target range set by authorities, according to Tim Evans, CEO of HSBC Vietnam.

The continued expansion of the middle class and in particular the expanding affluent sector will lead to changes in consumption as Vietnamese people start spending more and more on leisure and travel, according to HSBC. New infrastructure projects are also expected to fuel the country’s economic activities.

Regarding Vietnam’s economic prospects, Jacques Morisset, the World Bank’s Lead Economist and Program Leader for Vietnam, pointed out three new motivations for growth. The emergence of the Covid-19 pandemic has indirectly made Vietnam a reliable destination for many large foreign enterprises seeking to diversify their supply chains. The country can also take advantage of opportunities provided by its green economy orientation. Vietnam is one of the countries most affected by climate change, however it can also take advantage of this to develop solutions. The third growth driver is domestic demand of the growing middle class. Morisset affirmed that the WB would continue to support Vietnam in achieving its ambitious goal of becoming a high-income country by 2045.

Economist Vo Tri Thanh said the pandemic and the world economy’s growth capability will influence Vietnam’s economic growth in 2022. The government-sponsored recovery program must cover and focus on the economy’s key sectors with fiscal policies to play an important role. A short-term budget deficit may be tolerable to shore up the program’s financial strength, he added. He called on the government to turn the pandemic into an opportunity to initiate reforms and implement new policies to improve productivity and the business environment and to boost innovation and the start-up culture. The government’s continued implementation of widespread support measures is an important driving force for economic recovery.

Growth driving forces

The Covid-19 pandemic may not be over in 2022 due to the unpredictable appearance of new variants like Omicron, and therefore a 6-6.5 percent economic growth target (as stated in a National Assembly’s resolution) is a challenge. Nguyen Thi Huong, General Director of the Ministry of Planning and Investment’s General Statistics Office of Vietnam (GSO), said economic growth in 2022 will be better than in 2021 thanks to the country’s adaptation to the “new normal”. Driving forces for economic growth in 2022 include Vietnam’s socioeconomic achievements in the 2011-2020 period and the push from FDI enterprises, macroeconomic stability, and stable major economic balances facilitating more flexible and effective management of fiscal and monetary policies.

The post-pandemic economic development and recovery program with support packages based on fiscal and monetary policies will be an opportunity for businesses to quickly stabilize and recover production and trading activities.

“Domestic demand will recover and increase gradually because Vietnam has achieved a relatively high rate of two-dose vaccination,” Huong said.

Recent amendments to the Law on Public Investment will help improve investment by speeding up processes, simplifying procedures, and facilitating faster disbursement of public investment capital.

Vietnam’s major trade partners are on a rapid recovery course, promoting stronger trade. The EU-Vietnam Free Trade Agreement (EVFTA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) are expected to open up bigger market access for Vietnam’s trade and investment activities.

Tue Minh