Maintaining growth momentum in 2022

MInH HanH

Despite the complicated development of the pandemic in 2021, Vietnam’s GDP maintained a positive growth momentum, with inflation controlled at the lowest level in the last 6 years, and FDI attraction recovering. This has laid solid foundations for the economy to rebound strongly in 2022.

POSITIVE HIGHLIGHTS

Given the serious and complicated impacts of the pandemic on all aspects of socio-economic life, Vietnam's economic picture in 2021 showed bright spotlights.

GDP maintained a positive growth momentum at an encouraging level in the context of the complicated pandemic. GDP growth in 2021 reached 2.58 percent - lower than last year and is the lowest level in the past 10 years.

Inflation was at the lowest level in the last 6 years. The average CPI in 2021 increased by 1.84 percent compared to 2020, mainly due to low consumer demand and slow cash flow.

Import and export turnover reached a record level in the context of the world and domestic economic difficulties, and trade surplus. In 2021, the total export and import turnover of goods grew well, reaching USD668.5 billion, up 22.6 percent over the previous year. In which, export turnover reached USD336.3 billion, an increase of 19 percent compared to the previous year; import turnover hit USD332.2 billion, up 26.5 percent. Trade balance saw a surplus of USD4 billion.

The exchange rate was stable, interest rates decreased and remained low, and the banking system's operation was stable thanks to the active and flexible monetary policy of the State Bank. The USD/VND exchange rate saw mixed fluctuations as the interbank rate decreased by 1.1 percent while the central rate increased by 0.1 percent compared to the beginning of the year. Deposit interest rates decreased, creating conditions for credit institutions to further reduce lending rates. Lending rates (both existing and new loans) decreased by 0.5-2 percent/year, substantially supporting businesses. In 2021, credit institutions: (i) restructured the repayment term, keeping the debt group unchanged for about 630,000 customers affected by the pandemic with outstanding loans of over VND285 trillion (USD12.6 billion); (ii) exempted, reduced interest rates for over 1.96 million customers, with total outstanding loans of more than VND3.82 quadrillion (USD168.3 billion); (iii) provided new low-interest loans of over VND7.2 quadrillion (USD317.2 billion) so far for 1.2 million customers.

Digital transformation, science and technology development, and innovation made great strides. The Covid-19 pandemic, besides the negative impact, also created a "push" that promoted the strong development of Vietnam's digital economy. According to the e-conomy Report (2021), Vietnam ranks third in ASeAN and 14/50 in Asia in terms of digital economy scale. Vietnam's digital economy is estimated to reach USD21 billion in 2021 (about 5.8 percent of GDP), up 31 percent compared to 2020. Regarding e-commerce, Vietnam's market size in 2021 is estimated at USD13 billion, up 53 percent compared to 2020, becoming an important distribution channel of goods in the context of the pandemic. Regarding e-payment, the growth of payment value via Internet, mobile, and QR Code channels increased by 29 percent, 88.3 percent, and 129 percent, respectively - among the highest in the

world. Vietnam has 16.4 million active e-wallets, up 20.2 percent compared to 2020.

ECONOMIC FORECAST FOR 2022

GDP growth: In 2022, socio-economic activities are forecast to recover more strongly after the pandemic. Currently, international organizations are still optimistic about the prospects of Vietnam's economy in the medium and long term. Accordingly, Vietnam's economy is forecast to grow at 6.5-7 percent in 2022, provided that Vietnam well designs and implements an economic recovery and development program in association with the pandemic prevention strategy. This growth rate is aligned with the target set by the National Assembly and the Government in 2022, in which GDP increases by 6-6.5 percent, and CPI is controlled at less than 4 percent.

Inflation: In 2022, inflation is forecast at 3.4-3.7 percent, which is higher than the global and ASeAN averages; mainly due to Vietnam's inflation increasing along with economic recovery, global inflation pressure, raw material prices, and the lags of expansionary monetary and fiscal policy.

Import and export: In 2022, the total export and import turnover is forecast to grow by 13-15 percent, estimated at USD740-750 billion, of which export is forecast to reach about USD372-380 billion (up 13 -15 percent) due to: (i) The pandemic is under control, vaccine coverage continues to increase, (ii) The good economic recovery and the demand of Vietnam's major trading partners; (iii) Free trade agreements have come into force and many administrative reforms have been implemented to support import and export activities.

FDI: If Vietnam actively promotes the vaccination program, and soon achieves herd immunity and controls the pandemic, registered FDI is forecast to reach USD32-33 billion (up 5-10 percent), realized FDI is forecast to reach USD22-23 billion (up 10-15 percent) in 2022 thanks to the positive impact of new generation FTAs as well as Vietnam's improved business environment.

Interest rate: In 2022, it is expected that the State Bank will continue to operate monetary policy instruments proactively, flexibly, and uniformly, closely coordinating with fiscal policy and other macroeconomic policies to control inflation, contributing to macroeconomic stability, supporting the recovery of economic growth. Therefore, interest rates are forecast to maintain at a low level, although they may increase slightly compared to 2021.

Credit growth: In 2022, credit is expected to be expanded further, increasing by 14 percent. The State Bank's credit development orientation in 2022 will focus on synchronous coordination with the fiscal policy to support the economy, promoting credit in priority fields, production and business fields, especially key and effective projects; adjusting credit structure to align with the economic transformation.