Viet Nam’s economy has been bouncing back faster than expected in the first half of 2022, according to Andrew Jeffries, ADB Country Director for Vietnam.
The director was speaking at the launch of the Asian Development Outlook Updates 2022 yesterday.
He attributed the bounce-back to strong economic fundamentals, flexible monetary policy and stable recovery of manufacturing, services and domestic consumption.
“Building on this growth momentum, ADB retains its forecast for Viet Nam’s economy to grow by 5.5 per cent this year, followed by an acceleration to 6.7 per cent for 2023,” he said.
He also said prudent monetary policy and effective price controls would keep inflation in check at 3.8 per cent this year and 4.0 per cent for next year, unchanged from the projection made in April’s Asian Development Outlook.
However, risks to the economic outlook remain elevated. The global economic slowdown could weigh on exports whereas labour shortage is expected to impede the fast recovery of services and labour-intensive export sectors.
The low delivery of public investment and social spending, especially the implementation of the governmental Economic Recovery and Development Programme, could compound the situation, slowing growth this year and the next.
Nguyen Minh Cuong, Principal Country Economist at the Asian Development Bank (ADB), remarked that high vaccine coverage and milder symptoms of Omicron variants have allowed Asian countries, except China, to reopen their economies.
The switch from stringent pandemic preventive measures to flexible measures lifted Viet Nam’s PMI (purchasing managers’ index) to 52.7 points in August, against the figure of 40.2 points in the same month last year.
The country achieved GDP growth of 7.7 per cent in the second quarter of 2022 and a six-month average growth of 6.4 per cent.
“A strong macroeconomic base is the driving force behind the steady growth,” he said.
Public revenues rose by 19.4 per cent in the first eight months of the year and outpaced public expenditures, resulting in a fiscal surplus of 5 per cent GDP.
Bank credit grew by 15.2 per cent in late June compared to the same month last year. Credit growth caps were kept at 14 per cent. Treasury Bills were issued to absorb VND100 trillion from the economy so far.
Services saw an increase of 6.6 per cent in the first six months of the year. Tourism fared better with 7 per cent. Banking services and financial services followed suit with growth rates of 9.5 per cent and 9.1 per cent, respectively.
Manufacturing and processing industries were riding high with a six-month growth of 9.7 per cent, fuelled by exports.
Economic recovery, coupled with stable exchange rates, pushed eight-month exports up by 17.1 per cent and imports by 13.6 per cent, equivalent to a trade surplus of US$4 billion.
"However, clouds are gathering on the horizon," he added.
Manufacturing export orders were weakening. The possibility of higher Fed rates would fuel the situation, leading to remittance drops and current account deficits.
ADB forecast that Viet Nam's agricultural sector would grow by 3.5 per cent, industrial sector by 6.5 per cent and service sector by 6.6 per cent. — VNS