VNDIRECT RESEARCH
Foreign Direct Investment (FDI) overcame difficulties caused by the fourth wave of COVID-19 infections to achieved quite positive results in 3Q21. According to GSO, the registered capital of FDI projects in 3Q21 rose 24.3% yoy to US$6.9bn (vs. a decline of 2.6% yoy seen in 1H21). For 11M21, the registered capital of FDI projects climbed to US$26.5bn (+0.1% yoy). To be more specific, 1,577 newly licensed projects with a registered capital of US$14.1bn, an increase of 3.7% in terms of registered capital compared to the same period in 2020; 877 projects licensed in the previous years approved to adjust investment capital (incremental FDI) with a total additional capital of US$8.0bn (+26.7% yoy); 3,466 turns of capital contribution and share purchases of foreign investors with a total value of the capital contribution of US$4.4bn, a drop of 33.0% over the same period in 2020. Regarding disbursement capital, the implemented capital of FDI projects in 11M21 reached US$17.1bn, declining 4.2% yoy (vs. a 1.3% increase in 11M20).
Macroeconomic stability has been solidified despite challenge time Inflation is well controlled under the government’s target of 4%, despite higher energy price. Specifically, crude oil price average at US$71/barrel in 11M21 (+66% yoy), pushing the transportation index to average at 10.1% yoy in 11M21 (vs. a decline of 11.2% yoy in 11M20). However, average CPI increased only 1.8% yoy in 11M21, the lowest level since 2016, thanks to (1) lower food and foodstuff index amid the strong decline in pork prices, (2) lower consumption demand after the 4th wave of COVID-19 broke out. In addition, the government's agreement to reduce prices and fees for essential services such as electricity, water supply and telecommunications for customers affected by the COVID-19 pandemic also help curb inflation in 2021. With muted demand-pull, we expect inflationary pressure to remain low toward the year-end and maintain our 2021F average inflation at 2.1% yoy (+/- 0.2 percentage points), far below the government’s target of 4.0%. Figure 15: Foodstuff price index slumped as live hog prices dig deeper
Figure 14: Inflation well-managed
Source: GSO, VNDIRECT RESEARCH
Source: GSO, VNDIRECT RESEARCH
The dong strengthened against the dollar in the first 10 months of 2021 as we previously predicted in the November 2020 Econ-Update report. As of 31 Oct 2021, the interbank exchange rate for US$VND fell 1.5% ytd while the Vietnam Central bank-set exchange rate for the US$VND remained flat at VND23,140/US$. The exchange rate was buffered by strong demand for Vietnam dong due to (1) low inflationary pressure, (2) the large gap in deposit interest rates between the dong and the USD, (3) consistence foreign direct www.vndirect.com.vn
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