Vietnam set for a strong economic rebound

Vietnam set for a strong economic rebound.

Vietnam’s economy is expected to make a strong come back this year with a 6.5 percent growth forecast, said economists from the Asian Development Bank (ADB) during a press conference yesterday in Hà Nội.

ADB said the forecast is based on the country’s high vaccination coverage (more than 90 percent according to a government source and one of the world’s highest), trade expansion, and continued accommodative monetary and fiscal policies.

The Southeast Asian economy reported a 2.6 percent growth last year as renewed COVID-19 outbreaks severely hampered its economic recovery, tightened the labor market, and disrupted manufacturing and supply chains. Inflation decelerated to 1.8 percent in 2021 from 3.2 percent in 2020 on weak domestic demand; last year’s inflation rate was the lowest since 2016.

The labor market suffered severe shocks from both the supply and demand sides as the economy weakened and workers left the labor force, which fell by 2 million workers aged 15 and over in Q3 from the previous quarter, said a report by ADB.

A recovering labor market and other stimulus measures will spur industrial growth by a forecast 9.5 percent in 2022, contributing 3.6 percentage points to GDP growth. The sector got off to a strong start this year. The manufacturing purchasing managers’ index rose to 53.7 in January (over 50 indicating expansion) and to 54.3 in February from 52.5 in December, the fourth straight month of growth.

The Government’s tourism-reopening policy implemented in March and the lifting of pandemic controls are expected to boost services, with the sector forecast to grow by 5.5 percent and contribute 2.3 percentage points to GDP growth this year. Accelerated disbursements will drive construction and related economic activities.