Key drivers to fortify economic upswing

Key drivers to fortify economic upswing

The General Department of Vietnam Customs (GDVC) last week reported that after six months of consecutive trade deficit, Vietnam’s trade balance returned to a surplus. This is deemed a positive signal for the economy’s gradual recovery which will help the economy to reach higher growth in 2022, at 6-6.5 per cent as expected by the National Assembly.

In October, the total export-import turnover hit $55 billion, up 2.4 per cent over September, with a trade surplus of $2.74 billion.

The figure for the whole 10 months reached $539.42 billion, up by $99.54 billion or 22.6 per cent on-year. In which, the export and import values totalled $269.77 billion and $269.65 billion, up 17.4 and 28.3 per cent on-year, respectively. The total trade surplus stood at $125 million.

The key contributor to the trade surplus in October and 10 months is foreign-invested enterprises. Their total export-import turnover was $37.76 billion in October, leading the 10-month figure to $374.03 billion, up 25.4 per cent on-year.

This included $197.49 billion in export turnover – up 20.8 per cent over the same period last year, and $176.54 billion in import turnover – up 31 per cent on-year.

According to the GDVC, the biggest driver of Vietnam’s export turnover is the shipment of mobile phones and their spare parts, which fetched $46.57 billion, up by $4.4 billion or 10.4 per cent on-year. In Vietnam, Samsung accounts for over 90 per cent of export turnover of these products. The group has invested over $17.7 billion in Vietnam.

Samsung and other manufacturers of computers, laptops, and many other electronic products, such as LG, Canon, and Intel have exported these products with a total turnover of $40.85 billion in the first 10 months of 2021, up from $36.42 billion recorded in the corresponding period last year.

“The socioeconomic situation in Vietnam has steadily recovered, and witnessed encouraging progress by October, as the pandemic is fundamentally under control and the economy is gradually reopened,” stated Prime Minister Pham Minh Chinh.

In the first 10 months of 2021, total registered foreign direct investment increased 11.6 per cent, and realised capital surpassed $15 billion. In comparison with the number of newly established businesses in September, that of October climbed 111 per cent, while registered capital increased 74 per cent.

“These statistics show that the current hardships are just temporary and that the Vietnamese economy, with its solid macroeconomic foundation and stable major balances, is still capable of offering vast potential, advantages, and drivers for future growth,” PM Chinh stressed.

Last week, global analysts FocusEconomics told VIR that production, especially in industrial and processing activities, has been strongly increasing since the government began to ease social distancing rules.

In the first 10 months of this year, Vietnam’s index for industrial production climbed 3.3 per cent on-year, higher than the on-year rise of 2.7 per cent in the same period last year, in which the index of the manufacturing and processing sector, which creates 80 per cent of industrial growth, ascended 4.5 per cent on-year, higher than the on-year expansion of 4.2 per cent in the same period last year. Electricity production and distribution rose 4.1 per cent on-year, also higher than the on-year climb of 3.2 per cent in the first 10 months of last year.

“Industrial production is projected to accelerate in 2022 from this year’s estimated level,” FocusEconomics said. “Moreover, the underlying strength of Vietnam’s industrial sector remains intact as it is an attractive low-cost base for manufacturing firms, including those looking to relocate from China due to US-China trade tensions.”

FocusEconomics Consensus Forecast panellists estimate that industrial output will grow 8 per cent in 2022, which is up 0.6 percentage points from last month’s forecast and expand 9.4 per cent in 2023. Meanwhile, they expect GDP to expand 7.2 per cent in 2022, which is up 0.2 percentage points from last month’s forecast, and 6.8 per cent in 2023.

The Asian Development Bank has revised down Vietnam’s GDP growth forecast to 3.8 per cent in 2021 from its previous 6.7 per cent projection. Assuming the pandemic is brought under control by the end of 2021 and full vaccination covers 70 per cent of the population by the second quarter of 2022, the growth forecast for next year is revised to 6.5 per cent.

The World Bank also released its latest prediction on Vietnam’s economic outlook, saying that the economy could expand by around 4.8 per cent in 2021 and 6.5 to 7 per cent from 2022 onward.

“This projection remains positive but it is 2 percentage points lower than the one in the December 2020 Taking Stock edition. This is because of the negative effects associated with the latest pandemic outbreaks and is subject to further risks to the downside,” said the bank’s August 2021 edition of the Taking Stock report.