The IHS Markit Viet Nam manufacturing purchasing managers' index (PMI) for October 2021 showed a strong rebound in the manufacturing sector, the UK-based market research firm said in a recent analysis published on ihsmarkit.com.
According to the article, the nation’s economic recovery still faces headwinds due to a renewed upturn in daily new COVID-19 cases as well as continuing supply chain disruptions.
As daily new COVID-19 cases started to decline during the second half of September and early October, easing lockdown restrictions allowed the reopening of many factories, resulting in a sharp rebound in the IHS Markit Viet Nam Manufacturing PMI to 52.1 in October.
During the third quarter, severe disruptions to supply chains were noted by firms in the PMI survey results. Companies linked longer lead times to difficulties with transportation both domestically and internationally due to the pandemic, as well as raw material shortages. Manufacturers were also faced with surging input costs. Shortages of labour also contributed to rising backlogs of work, as migrant workers returned to their home provinces and towns during the protracted lockdowns and widespread factory closures.
It said the economic impact of the pandemic is expected to recede during 2022 as vaccination rollout becomes more widespread across the population of Viet Nam.
Over the medium-term outlook for the next five years, a number of key drivers are expected to continue to make Viet Nam one of the fastest growing emerging markets in the Asian region.
Firstly, Viet Nam will continue to benefit from its relatively lower manufacturing wage costs. Secondly, Viet Nam has a relatively large, well-educated labour force compared to many other regional competitors in Southeast Asia, making it an attractive hub for manufacturing production by multinationals. Third, rapid growth in capital expenditure is expected, reflecting continued strong foreign direct investment by foreign multinationals as well as domestic infrastructure spending. Fourth, Viet Nam is benefiting as a potential market for companies in the current wave of shifting productions to Asia. Fifth, many multinationals have been diversifying their manufacturing supply chains during the past decade to reduce vulnerability to supply disruptions and geopolitical events.
Viet Nam is also set to benefit from its growing network of free trade agreements, including the ASEAN Free Trade Agreement (AFTA), the Regional Comprehensive Economic Partnership (RCEP), and the EU – Viet Nam Free Trade Agreement (EVFTA).
Despite these near-term risks, over the medium-term economic outlook, a large number of positive growth drivers are creating favourable tailwinds and will continue to underpin the rapid growth of Viet Nam 's economy. This is expected to drive strong growth in Viet Nam's total GDP as well as per capita GDP.
Viet Nam's total GDP is forecast to increase from US$270 billion in 2020 to $433 billion by 2025, rising to $687 billion by 2030. This translates to very rapid growth in Viet Nam's per capita GDP, from $2,785 per year in 2020 to $4,280 per year by 2025 and $6,600 by 2030, resulting in substantial expansion in the size of Viet Nam's domestic consumer market. — VNS