Thanks to a solid recovery in services and buoyant manufacturing, Vietnam’s economic recovery has intensified over the past six months. According to the World Bank’s economic assessment for Vietnam released today, GDP growth is anticipated to rise sharply from an estimated 2.6 percent in 2021 to 7.5 percent in 2022, while inflation is anticipated to average 3.8 percent in the course of the yr .
According to the Asian Development Bank (ADB), Vietnam’s GDP growth in 2022 shall be 6.5% year-on-year, making Vietnam the ASEAN country with the fastest-growing economy.
According to the World Bank’s biannual economic assessment of Vietnam, Taking Stock: Education to Grow, the country’s GDP grew by 5.2 percent[1] within the fourth quarter of 2021, 5.1 percent in the primary quarter of 2022 and seven.7 percent within the second quarter of 2022, with the intention to meet pent-up demand.
While the pandemic continued to have a major negative impact on the Vietnamese economy, such growth would represent a major improvement over the two.58% rate seen in 2021.
Announcing the bank’s Covid-19 Country Assessment Report, ADB Senior Economist James Villafuerte noted that the quantity was still 0.5 percentage points below the bank’s April 2017 forecast.
The major driver shall be production. Other areas corresponding to tourism, construction and others are expected to see further recovery.
While data showed GDP grew at a slower-than-expected 5.03% year-over-year pace within the three months to March, economic growth is prone to gain momentum in the ultimate three quarters of the fiscal yr, helped by rising vaccination rates. In the best-case scenario, the rise can be 6.5% if the conflict between Russia and Ukraine was resolved.
According to Villafuerte, greater than 28 million Vietnamese were adversely affected by the pandemic last yr, resulting in job losses, job changes or business suspensions amid stringent lockdowns.
The epidemic also caused a serious labor shortage and related production interruptions – within the third quarter of 2021, two million employees visited their hometowns.
Villafuerte urged the Vietnamese government to proceed strengthening the health care system to make sure a rapid economic recovery this yr. This included ensuring medical examiners were adequately supported, maintaining the availability of essential health care services, and allocating additional resources to the health system to arrange for the response to Covid-19 and other potential health shocks.
Meanwhile, this optimistic view is subject to increased risks that threaten the likelihood of economic recovery.
There are risks corresponding to slowing growth or stagflation in major export markets, further commodity price shocks, continued disruptions to global supply networks, or the emergence of latest versions of the COVID-19 virus. Domestic challenges include persistent labor shortages, the potential for higher inflation and increased financial sector concerns.
The document recommends a proactive response by the authorities in light of the beginnings of economic recovery within the country, the deteriorating global demand picture and increased concerns about inflation.
To protect poor and vulnerable people from the consequences of the fuel price shock and rising inflation, the economic recovery and development policy package and the expansion of targeted social safety nets must be implemented as quickly as possible.
The banking sector is beneficial to adopt an insolvency framework and conduct close monitoring, improve NPL reporting and provisioning.
The State Bank of Vietnam must be prepared to maneuver to tighten monetary policy to cut back inflationary pressures through rate of interest increases and tighter liquidity requirements if threats to rising inflation materialize, as core inflation accelerates and the patron price index rises above government – set a goal of 4 percent.
With GDP growth rates of 6.9% and 5.9% respectively, the Philippines and Malaysia would join Vietnam as the highest three Southeast Asian countries with the most effective economic prospects in 2022.
Source: WorldBank.org, HanoiTimes.vn, Bloomberg.com
