Amro forecasts 7% rebound for Vietnam’s GDP amid demand recovery

VIETNAM’S gross domestic product (GDP) is expected to grow by 7 per cent in 2022 and 6.5 per cent in 2023 as it continues to recover robustly from the Covid-19 pandemic, according to a report released Wednesday (Oct 12) by the Asean+3 Macroeconomic Research Office (Amro).

The report indicated that Vietnam’s economic prospects have been buoyed by “a strong recovery in private consumption, continued foreign direct investment flows, a supportive fiscal stance, and a recovery in the services sector”.

The country’s manufacturing and services sector have both surpassed their pre-2019 levels, aided by a robust export sector. However, the report also pointed out tourism and other services continued to lag behind, as the effects of border reopening have yet to take full effect.

Amro noted that Vietnam’s increasingly diversified export mix has helped the country’s export sector’s recovery, and helped to grow its current account surplus. 

The country’s balance of payments surplus, sound policies and a broadly stable currency were also listed as contributing factors to the research office’s positive outlook on Vietnam’s economy going forward. 

Despite the optimistic growth projection, Amro highlighted key external risks posed by “global supply chain disruptions, flare-ups in more vaccine-resistant Covid-19 variants, tightening of financial conditions in advanced economies, and elevated global oil and food prices related to geopolitical developments”.

The financial sector in particular may see increased risks due to the impact of the pandemic on asset quality, Amro said. 

“The relatively low ​​non-performing loan ratio reflects in part the State Bank of Vietnam’s forbearance policy which has expired at end-June and could unmask weaker underlying credit quality. Separately, potential risks from the real estate sector development warrant close monitoring in the near to medium term.”

The effects of the pandemic might continue to have repercussions in the long term. Its uneven impact may contribute to widening inequalities as a result of its uneven impact across high and low-income earners, between export-oriented and domestic-oriented firms, and between large corporations and small and medium-sized enterprises. 

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“Lasting scars from the pandemic, such as the corporate sector financial distress and the impact on labour and employment, may undermine growth potential over the medium to long term,” said Amro.