Vietnam’s economic growth to remain positive

Quang le

Vietnam’s economic growth is expected to rebound to 6.7 percent this year despite the recent resurgence of the Covid-19 pandemic in nearby countries, and rise to 7 percent in 2022, according to the Asian Development Bank (ADB).

In its Asian Development Outlook (ADO) 2021 released in April, the ADB said Vietnam’s economic growth will be boosted by exportoriented manufacturing, increased investment, and expanding trade.

The growth momentum is expected to continue, thanks to ongoing reforms to improve the business environment and Vietnam’s participation in multiple free trade agreements (FTAs) involving almost all advanced economies. The report said Vietnam can maintain inclusive growth by softening the pandemic’s impact on poverty and incomes.

In April 2021, Vietnam’s Central Institute for Economic Management (CIEM) outlined three scenarios for economic growth, based on Vietnam's management of the pandemic this year. Under the first scenario (normality), the CIEM forecasts that the Vietnamese economy will grow 5.98 percent with 3.51 percent inflation. Economic growth will rise to 6.45 and 6.61 percent in 2022 and 2023, respectively. Under the second scenario (fiscal and monetary easing), growth will reach 6.43 percent in 2021 with inflation at 3.78 percent. The growth is expected to be 6.8 and 6.83 percent in the next years. Under the third scenario (fiscal and monetary easing, along with institutional reform), Vietnam's economy will grow by 6.47 percent in 2021 and 3.56 percent in inflation, reaching 6.88 and 6.92 percent in subsequent years.

According to Fitch’s report, Vietnam’s public finances outperform peers amid pandemic stress. Vietnam’s public finance metrics have improved markedly relative to peers since the start of the pandemic.

The improved fiscal position reflects Vietnam’s broader economic strength. Tourism earnings have been severely hit by the pandemic, but other parts of the economy have proved robust. Vietnam was one of only a few countries globally to post positive economic growth in 2020, of 2.9 percent. Growth was buoyed by external demand, with goods exports rising by 6.9 percent. Domestic activity was also supported by the limited spread of Covid-19 in the country.

Fitch expects growth to remain strong, at around 7 percent annually, in 20212022, buoyed by continued export expansion and higher investment. A pandemic fiscal package covering 20202021, worth about VND292 trillion (about 3.6 percent of 2020 GDP), will reinforce growth prospects.