Vietnam sees stronger 2022 after Covid-19's supply chain shock

Hanoi

VIETNAM'S prime minister said economic growth will accelerate in 2022 after undershooting expectations this year, as the nation aims to revive manufacturing and exports from a crippling coronavirus outbreak.

Premier Pham Minh Chinh, speaking on Wednesday (Oct 20) at the opening of Parliament's autumn session, forecast gross domestic product (GDP) next year will expand in a range of 6 per cent to 6.5 per cent.

The annual address to the National Assembly, which sets the economic direction for the next year, comes as the government works to mend an economy hobbled by tough anti-virus lockdowns, which shut factories and crippled global supply chains.

"The country faced increasing difficulties with the outbreak of the Delta variant" this year, which challenged the resiliency of its economy, Chinh said. He pledged greater flexibility on the part of authorities to help guide the recovery, ease supply chain blockages and help the flow of goods. He also said regulators will be flexible in the management of monetary policy.

The ravages of the Covid-19 Delta variant sent GDP plunging 6.17 per cent in the third quarter, the worst performance since the government started tracking the figure. The economy this year is seen by policymakers growing 2.5-3 per cent, far below the 6.5 per cent expectations set at the same event last year.

As restrictions ease and the country accelerates vaccinations, Chinh's government is now tasked with restoring Vietnam's reputation as a reliable global supplier of everything from Walmart furniture and Adidas sneakers to Samsung smartphones.

Authorities had imposed tough measures for months to contain the virus, ranging from ordering factories to shut down if they cannot provide sleeping arrangements for workers to barring residents in the nation's commercial hub of Ho Chi Minh City from shopping for food.

The looser restrictions now, however, are creating new workforce challenges as thousands of workers head back home, leaving electronics and garment manufacturers with about half their normal staff.

Chinh said that the labour market will recover and stabilise next year. "There are still some hidden risks that could slow economic recovery and growth if the epidemic cannot be fundamentally controlled to reopen the economy," he added.

The prime minister also forecast inflation next year will be at about 4 per cent, while below that level through 2021. Exports this year will end up growing 10.7 per cent, he said, without providing an outlook for 2022.

The outlook given by the prime minister will be used by Parliament as it sets official economic targets for the coming year, which it will do before the session ends in mid-November. BLOOMBERG