Vietnam's 2021 GDP outlook at risk as virus curbs crimp

Hanoi

VIETNAM'S statistics office forecasts gross domestic product (GDP) to grow 2.5 per cent this year, far below the official target of up to 6.5 per cent, as tough anti-virus policies have impacted almost every corner of its economy.

The outlook, provided on Wednesday by the head of GDP data at the General Statistics Office, paints an increasingly bleak picture for a nation that had earlier powered through the Covid-19 pandemic.

After successfully curbing infections during the early stages, the South-east Asian nation now sees its export-dependent economy crippled by restrictions that are disrupting supply chains, shuttering factories and crimping output.

The full-year estimate comes after the statistics office earlier in the day reported that GDP in the third quarter slumped 6.17 per cent from a year earlier, the worst performance since it started tracking the figure.

Authorities have 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.

About 94 per cent of the country's companies are facing "difficulties", Pham Dinh Thuy, head of industrial statistics, said at a briefing in Hanoi, citing supply chain disruptions, labour shortages and higher costs for wages and worker accommodations.

The head of GDP statistics, Le Trung Hieu, said growth in the final quarter of the year could be 5.3 per cent, after expanding 1.42 per cent during the first nine months.

To meet the government's official full-year target range of 6-6.5 per cent, the country would need "a very high growth rate" in the fourth quarter and "that's impossible now", he said.

Growth at 2.5 per cent for 2021 is the "most realistic" outlook, he said.

Nguyen Anh Duc, head of institutional sales at SSI Securities Corp, said the relatively benign market reaction is due to government easing of tough anti-virus restrictions in Hanoi, Ho Chi Minh City and other southern industrial regions amid a rise in vaccinations.

"If the government keeps up its pace of vaccinations, it is reasonable to believe that the economy will start recovering," he said. "If the virus is well controlled, the economy will recover rapidly next year."

About 8.8 per cent of the nation's population has been fully vaccinated, said the health ministry. In Ho Chi Minh City, more than 29 per cent of residents were fully vaccinated as of Monday, said the city's press centre.

Virus measures have shuttered factories across the southern economic core around Ho Chi Minh City, particularly clothing and shoe manufacturers with clients that include Urban Outfitters, Nike and Abercrombie & Fitch.

Meanwhile, some higher-end technology manufacturers have been able to keep running with smaller, isolated workforces.

Exports fell 0.6 per cent in September compared to a year earlier, while imports climbed 9.5 per cent. BLOOMBERG