HSBC sees Vietnam growing slower than earlier forecast

Travel-related services such as accommodation and transportation remained in a deep slump, it said in a note.

"There is nothing to be surprised when immigration restrictions are still in place, although Vietnam has made some travel agreements with neighboring countries."

The tourism industry could hardly revive until an effective vaccine for Covid-19 was developed and there was a new approach toward global tourism co-operation.

It also said the inflation rate in 2020 was probably 3.3 percent, much below the 4 percent target set by the State Bank of Vietnam.

Though the country escaped the worst effects of the pandemic, its businesses and consumers affected by Covid-19 needed great support, but it would be difficult since Vietnam’s public debt-to-GDP ratio was 65 percent.

The fiscal deficit would increase to 5.2 percent of GDP in 2020 before falling to 4.6 percent in 2021, resulting in public debt falling below 60 percent.

With the economy likely to revive, the central bank would stick to its monetary policy in the first quarter of 2022 before raising interest rates by 0.25 percentage points in the third quarter.

Vietnam would remain a "shining star" in 2021, and also benefit from a technology-driven revival, consistent FDI inflows and various trade agreements, HSBC said.

The only challenge was likely to come from the labor market since, despite some improvement in the third quarter of 2020, unemployment was still on the rise and salaries were declining.

If this continued, consumer spending, a major factor boosting the economy, would take longer to recover.

The government has set a GDP growth target of 6.5 percent for 2021.