HCMC – Vietnam’s gross domestic product (GDP) growth is forecast at 6.5% in 2022 and 6.7% in 2023, a rebound made possible by the country’s high Covid-19 vaccination rate, according to the Asian Development Bank’s (ADB) Asian Development Outlook 2022 released on April 6.
“A resurgence of the Covid-19 pandemic tightened Vietnam’s labor market, disrupted supply chains and slowed growth in 2021. However, the economy is set for a strong rebound this year and next, made possible by a high vaccination rate that enabled disruptive containment measures to be dropped, trade expansion and continued monetary and fiscal accommodation,” said Andrew Jeffries, Country Director of the ADB in Vietnam.
Nguyen Minh Cuong, an economic expert at the bank, said the country would see a possible strong rebound thanks to the Government’s economic recovery and development program (ERDP).
The ERDP’s monetary measures will provide additional liquidity to the economy through an expected reduction in the lending rate by 0.5-1 percentage point by credit institutions over this year and next and the continued implementation of credit relief measures until the end of 2023.
The State Bank of Vietnam set the 2022 credit growth target at 14%. Reaching the target will be aided by interest rate cuts and revived credit demand from businesses, according to the ADB report.
A recovering labor market and other stimulus measures will spur industrial growth by a forecast 9.5% in 2022, contributing 3.6 percentage points to the GDP growth. Agriculture output is forecast to expand 3.5% this year, contributing 0.4 percentage points to the GDP growth on revived domestic demand and rising global commodity prices.
The country’s tourism-reopening, which began in mid-March, and the lifting of pandemic controls are expected to boost services, with the sector forecast to grow 5.5% and contribute 2.3 percentage points to the GDP growth this year. Accelerated disbursements will drive construction and related economic activities.
The ERDP will speed up public investment, stimulating domestic demand. Improved coordination between the Government and local authorities and restored labor mobility will increase domestic and foreign investor confidence in Vietnam’s recovery, according to the ADB.
External trade will remain robust this year. The Regional Comprehensive Economic Partnership, which came into effect January 1, is expected to step up trade and recovery once the Covid-19 pandemic passes, forming stable and long-term export markets for Vietnam.
Merchandise exports are forecast to rise 8%-10% this year. Imports will rise on increased demand for capital goods and manufacturing inputs, and rebounding domestic consumption. The recovery of tourism and sustained remittances will support a current account surplus, forecast at 1.5% of the GDP this year and 2.0% in 2023.
Cuong said that high Covid infections since mid-March could obstruct the economy’s return to normalcy this year. A slowing global recovery and a surge in global oil prices from the Russian war on Ukraine would directly impact Vietnam’s external trade and domestic oil prices, which would affect inflation.
Moreover, uncertainties in the global financial markets and the withdrawal of monetary and fiscal accommodation by advanced economies would weaken the Vietnamese dong, rendering imports more costly and putting additional upward pressure on inflation.
Inflation is forecast to accelerate to 3.8% in 2022 and 4% in 2023, said Cuong.