Retail, services shine amid cloudy economic outlook

"After sluggish GDP performance in the first quarter, Vietnam is still not out of the woods yet. In particular, we have not seen the light at the end of the tunnel on the trade front," HSBC analysts said in a recent report.

Minister of Planning and Investment Nguyen Chi Dung said that the economy faces a number of challenges, including high inflation and tightened monetary policy globally.

But although exports dropped 11.2% and imports fell 13% year-on-year last month, revenue from retail and services grew 11.5%, implying a rise in domestic consumption, data from the ministry showed.

Total supply of goods at Ho Chi Minh City’s wholesale market in the five-day national holiday earlier this month rose 5.7% year-on-year, and consumption at supermarkets and malls surged, according to the city’s Department of Industry and Trade.

Tourism also showed signs of recovery. Vietnam welcomed around 984,000 international tourists last month, taking the year-to-date figure up 62% from the same period in 2019.

Changes in visa policy are set to pump the figures even further. At the National Assembly session to begin on Monday, the government seeks to increase the e-visa duration from one to three months.

The new government proposal also includes extending the duration of stays for tourists from countries enjoying 15-day visa exemptions to 45 days.

Cloudy outlook

But the scale of the recovery in retail and service remains a question without an answer, as statistics reveal both positive and negative trends that make outlook prediction difficult.

Payment platform Payoo data shows that supermarkets and convenience stores recorded a revenue decline of 5-10% in the first quarter compared to the previous period.

Revenue at malls also dropped 10%, while sales of electronic devices plunged 30-50% in the same period, it added.

Purchase of big-ticket items, however, seemed to be rising. Used car trading platform Cho Tot Xe saw the number of inquiries rising 11% year-on-year and the number of listings rose 7% in the first four months.

Demand for used cars surged 26% year-on-year during the five-day holiday, which shows a positive signal amid a challenging economy, said the platform in a report.

Payoo also found that fine-dining restaurants that use its platform saw the average value of each order rising 7% year-on-year in the first quarter.

"Rich people are willing to pay, and this helps stir up market development," a company spokesperson said.

If the National Assembly approves a 2% reduction in VAT for the last six months of this year, retail and service sales will likely recover even stronger, said Pham Thi Thanh Xuan, a lecturer with the University of Economics and Law at Vietnam National University HCMC.

The 2% discount will have a direct impact on people’s income, especially amid high inflation, she added.

But another factor that plays a major role in consumption recovery is credit growth, which was only 2% as of mid-April, half of the same figure year-on-year.

HSBC added, "While we will likely see weak growth in the first half, we expect the services sector to receive a punchier boost and the trade tide to turn in the second half, lifting whole-year growth to 5.2% in 2023."