Due to solid service recovery and resilient manufacturing, Vietnam's economic recovery has advanced over the past six months. According to a World Bank economic assessment for Vietnam released today, GDP growth is anticipated to soar from an estimated 2.6 percent in 2021 to 7.5 percent in 2022, while inflation is predicted to average 3.8 percent during the year.
Vietnamese GDP growth is predicted to be 6.5% year over year in 2022, making Vietnam the ASEAN nation with the fastest-growing economy, according to the Asian Development Bank (ADB).
According to the World Bank's biannual economic assessment for Vietnam, "Taking Stock: Educate to Grow," the country's GDP grew by 5.2 percent in Q4-2021, 5.1 percent in Q1-2022, and 7.7 percent in Q2 2022 as consumers met pent-up demand.
Even though the pandemic continued to have a significant negative influence on the Vietnamese economy, such growth would be a significant improvement above the 2.58% pace observed in 2021.
At the announcement of the bank's Covid-19 country assessment report, ADB senior economist James Villafuerte noted that the amount was still 0.5 percentage points below the bank's April 2017 prediction.
The primary driver will be manufacturing. While other areas like tourism, construction, and others are anticipated to continue recovering.
Although data indicated that GDP increased at a slower-than-anticipated 5.03% rate from a year earlier in the three months to March, economic growth is likely to pick up steam in the final three quarters of the fiscal year, aided by rising vaccination rates. In the best-case scenario, growth would reach 6.5% should the conflict between Russia and Ukraine be resolved.
Over 28 million Vietnamese people, according to Villafuerte, were adversely affected by the pandemic last year, which led to job losses, shift swapping, or the suspension of corporate activities under stringent lockdowns.
A serious labor shortage and associated production interruption were also brought on by the epidemic as two million workers visited their hometowns in the third quarter of 2021.
Villafuerte urged the Vietnamese government to further strengthen the healthcare system in order to ensure a swift economic recovery this year. This included giving health workers adequate support, maintaining the provision of fundamental healthcare services, and allocating additional resources to the healthcare system in order to prepare for the Covid-19 response and other potential health shocks.
This optimistic view, meanwhile, is vulnerable to increased risks that jeopardize the likelihood of a recovery.
There are risks such as a slowdown in growth or stagflation in the major export markets, more shocks to commodities prices, ongoing disruption of the global supply networks, or the appearance of new COVID-19 versions. Continued labor shortages, the possibility of greater inflation, and increased financial sector concerns are among the domestic challenges.
The paper recommends a proactive reaction by the authorities in light of the embryonic domestic recovery, the dimming global demand picture, and the increased inflation concerns.
To protect the poor and vulnerable from the effects of the fuel price shock and rising inflation, the Recovery and Development policy package should be implemented as soon as possible, and targeted social safety nets should be expanded.
Adopting an insolvency framework and conducting close monitoring, strengthening non-performing loan reporting and provisioning are all advised in the banking sector.
The State Bank of Vietnam should be prepared to shift to monetary tightening in order to reduce inflationary pressures through interest rate increases and more stringent liquidity requirements if upside risks to inflation materialize, with core inflation speeding up and the consumer price index rising above the government-set 4 percent target.
With GDP growth rates of 6.9% and 5.9%, respectively, the Philippines and Malaysia would round out the top three countries in Southeast Asia with the strongest economic prospects in 2022, along with Vietnam.
Source: WorldBank.org, HanoiTimes.vn, Bloomberg.com