Vietnam set for robust rebound in 2022

By Dat Nguyen, Ha Mai   January 1, 2022 | 05:30 pm PT
Vietnam set for robust rebound in 2022
Containers are transported at Cat Lai Terminal in Ho Chi Minh City, December 24, 2021. Photo by VnExpress/Thanh Nguyen
Organizations have pegged Vietnam’s GDP growth at 6.5-7.5 percent in 2022, citing solid recovery potentials in manufacturing and domestic demand.

The World Bank has forecasts Vietnam’s growth at 6.5-7 percent from 2022 onward as it expects a sustained global recovery will ensure strong demand for Vietnamese products in its main export markets of the U.S, the E.U. and China.

"The rebound will also be supported by the vaccination of at least 70 percent of the adult population by mid-2022, preventing severe new outbreaks," it said in a report.

Vietnam has achieved this vaccination target by the end of 2021 and is focused on giving the booster shot to deal with the new Omicron variant.

The World Bank also announced this week it would finance a $221.5 million loan to support Vietnam’s recovery from the pandemic, with focus on several policy reforms, including easing tax burden on businesses and improving access to financial assistance among vulnerable groups.

The Asian Development Bank (ADB) pegs Vietnam’s growth at 6.5 percent in 2022, driven by expanding vaccination coverage and other factors, while brokerage VNDirect has an even more optimistic growth forecast at 7.5 percent.

The brokerage sees growth driven manufacturing and exports regaining momentum, strong foreign direct investment and increased domestic demand triggered by stimulus packages.

VNDirect said it expects companies to recover well and maintain an average earnings per share growth of 20 percent in 2022 and 2023.

One of the key supporting factors for growth is that the country will likely achieve its target to fully vaccinate 70 percent of the population this year, it said.

Services are likely to recover with the resumption of tourism and entertainment in the second quarter if the Covid-19 situation remains under control.

Revenue from retail and services therefore could grow 10-12 percent in 2022.

Several companies are drawing up roadmaps to boost recovery.

The Thanh Cong Textile Garment Company plans to increase its number of employees by 20 percent as it has secured several major orders that will ensure jobs for the first half of the year.

"In addition to the main export markets like Asia and America, we plan to expand to more European and African countries this year," said deputy general director Tran Nhu Tung.

Phan Phuc Son, deputy director of the Saigon - Ha Long Hotel Tourism Jsc in the northern province of Quang Ninh, is hopeful that the tourism industry will rebound this year.

"Quang Ninh Province is expected to welcome the first international tourist group in January 2022, giving us more of recovery."

The hotel is working with state agencies as well as businesses in the Quang Ninh Tourism Association to establish a "green corridor" for package tours, meeting the needs of international guests coming to Vietnam.

Targets achievable

2021 was another challenging year for Vietnam as the Delta variant forcing many economic activities to shut down in the third quarter.

GDP growth dropped for the second year in a row to 2.58 percent.

But the National Assembly expects growth to rebound in 2022 and has set a target of 6-6.5 percent for the year.

Tran Hoang Ngan, head of the Ho Chi Minh City Institute for Development Studies, said that the growth target is feasible and actual rate could even exceed it thanks to the recovery of major export markets such as the U.S. and Europe, and the many free trade agreements Vietnam has signed, including 14 that have taken effect.

To ensure growth, the government needs to focus on disbursing VND526 trillion ($23.25 billion) worth of public investment, which is "both an opportunity and a challenge," he said.

Other experts said that the size of the stimulus package will determine how fast and effective economic recovery will be.

"Without special support programs, without fiscal and monetary stimulus packages, Vietnam will miss opportunities, be left behind, and not realize its five-year economic development targets," said economist Can Van Luc.

Bui Quang Tuan, director of the Vietnam Institute of Economics, said that overall economic recovery program, to be implemented from 2022 to 2023, could amount to some VND666 trillion, or 8 percent of the 2020 GDP.

The aid package needs to be large and strong enough to support both supply and demand, and growth-supporting solutions should be associated with digital transformation and green growth, he said.

The scale of the stimulus package is set to be decided at an eight-day extraordinary session of the National Assembly in January.

The World Bank has advised the government to improve the implementation of its cash relief programs to reach more households, informal workers, and those unregistered in existing social assistance registries who have been affected.

Cash support should last for several months instead of a one-time transfer, it has said

Obstacles remain

But some lawmakers have expressed concerns that the public debt ratio could rise as the government plans stimulus packages, posing financial risks.

The estimated public debt ratio of 44 percent of GDP this year looks low, but this has come about after adjusting some data, which caused GDP to increase by VND1,000 trillion, said Nguyen Huu Toan, deputy chairman of the National Assembly’s Finance and Budget Committee.

"The ratio looks low but it is actually a matter of serious concern."

Another concern is inflation, which is set to be very high in 2022, said Nguyen Thi Huong, head of the General Statistics Office.

As Covid-19 is expected to remain under control, demand for manufacturing and consumption will rise, and so will prices of materials, fuels and transportation, she said.

Other factors that will push up inflation are rising prices of animal feed, construction and education, she added.

Although Vietnam’s inflation hit a six-year low of 1.84 percent in 2021, the ADB has forecast it could reach 3.8 percent next year on the volatility of global price movements and pressure coming from a weaker dong against the U.S. dollar if capital outflows happen due to a more front-loaded response of advanced economies to curb inflation.

Regardless of these challenges, CEO of HSBC Vietnam Tim Evans has expressed optimism that the country will reach new heights in 2022.

"So as 2021 draws to a close, it is time to take a deep breath, believe that the worst is really behind us this time and that Vietnam will resume its economic cadence from 2019," he said.

HSBC forecasts that growth will hit 6.8 percent, driven by a return to strong FDI investment with a clear focus on the manufacturing sector which should further drive the Vietnamese export sector.

Continued middle class growth and the rising affluent sector in particular will further drive the consumer story in Vietnam, which will lead changes in consumption as Vietnamese start spending more and more on leisure and travel, he added.

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