Vietnam's prospects strong in 2021, say analysts

VIETNAM's GDP growth accelerated to 4.48 per cent year on year (yoy) in the last quarter of 2020, from 2.69 per cent yoy in Q3 2020, ahead of expectations.

This pushed its full-year growth to 2.91 per cent in 2020 - one of the highest globally in a pandemic year when few economies managed to secure positive growth.

This capped a resilient year for Vietnam, in which it recorded its lowest GDP growth level in 10 years - while still outperforming most of the world. Heading into 2021, its prospects continue to look robust even as the Communist Party of Vietnam (CPV) prepares for its 13th National Congress from Jan 25 to Feb 2.

The country's official growth target for 2021 is currently 6 per cent, though Vietnam will strive for 6.5 per cent, Prime Minister Nguyen Xuan Phuc said recently.

The country's latest five-year socio-economic development plan (2021-25) sets an average annual growth target of 6.5 per cent to 7.0 per cent.

Analysts are even more optimistic. A recent BofA Global Research report maintains a bullish outlook with a forecast of 9.3 per cent growth for 2021, which, it notes, is significantly stronger than consensus expectations of 7.7 per cent.

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Several stars appear to be aligning for Vietnam. First, a spate of free-trade agreements - namely the EU-Vietnam Free Trade Agreement (EVTA), the Regional Comprehensive Economic Partnership (RCEP) agreement and the newly-concluded Vietnam-UK Free Trade Agreement (UKVTA) - have recently been signed or taken effect.

These new agreements, said the BofA report, are expected to enhance access to key external markets, even as Vietnam is expected to benefit from supply chain relocations.

Second, Vietnam was able to quickly and successfully contain the pandemic in the first half of last year, allowing business activities to gradually resume. Though a number of countries are facing second or third waves, with new and potent variants of the virus now emerging, vaccines are also on their way.

On Jan 4, deputy health minister Truong Quoc Cuong announced that Vietnam has agreed to buy 30 million doses of the AstraZeneca vaccine - enough to vaccinate 15 million people - and is in talks with other producers, including Pfizer-BioNTech, Russia's Sputnik V and China.

Other factors working in Vietnam's favour include the government's efforts in digitalisation and e-commerce, and an abundant and increasingly educated workforce.

Entering 2021, a key event ahead will be the CPV's 13th National Congress later this month, which will decide on key leaders and establish the party's agenda for the next five to 10 years. Subsequently, leadership positions will be put to the National Assembly for voting in May.

Positions up for renewal include the post of general secretary and de facto top leader. Since 2011, this has been held by Nguyen Phu Trong, who went on to becaome President in 2018. Regardless, observers do not expect major shake-ups to medium-term policies or goals; rather, what will be key is the effective containment of the pandemic, and the rolling out of vaccines in Vietnam and around the world.

A recent UOB report maintains a growth forecast of 7.1 per cent for 2021, exceeding official targets - but the forecast assumes an effective rollout of vaccines in H1 2021, with social-distancing measures gradually reduced from H2 2021, culminating in Covid-19 containment by Q4.

The report also noted that Vietnam's vaccine purchases will strengthen the country's capability to control local infections. However, it "remains to be seen how fast the deployment could take place due to supply constraints, logistics challenges and domestic health care infrastructure."