Resiliency pointing to positive growth outlook

As the 10th session of the 14th National Assembly (NA) opened last week, Standard Chartered Bank released its fresh forecasts about Vietnam’s growth, which is expected to be 3 per cent in 2020, with a rebound of up to 7.8 per cent hoped for in 2021. Rising consumption on improving sentiment and faster manufacturing will drive growth in the fourth quarter.

“Vietnam is one of the few Asian economies to have registered positive growth so far this year, despite the second wave of infections. We expect fourth-quarter growth to increase as domestic activity resumes and sentiment picks up,” said Chidu Narayanan, economist for Asia at Standard Chartered Bank. “Improving services growth and infrastructure investment should help Vietnam outperform the rest of Asia. We maintain our positive view on Vietnam’s medium- and long-term economic outlook.”

According to the bank, a likely improvement in external demand in the fourth quarter should support manufacturing growth, forecast at roughly 7.3 per cent in 2020. Both exports and imports are expected to increase as a result. Trade is likely to remain in surplus for the rest of 2020 as exports and imports move in tandem.

Moreover, it is anticipated that construction activity will improve in the fourth quarter, supported by increased public infrastructure investment. Private consumption, accounting for nearly 68 per cent of GDP, should grow strongly and improve domestic sentiment. Private investment, however, is likely to remain subdued on lingering uncertainty about medium-term demand.

“A number of international organisations remain optimistic about Vietnam’s economic outlook, despite the negative impacts of COVID-19,” Prime Minister Nguyen Xuan Phuc told the NA. “It is expected that the economy will grow 6 per cent in 2021.”

It is estimated that each percentage point of growth can help generate about 500,000 direct jobs.

“In 2021 and the period to 2025, we will continue focusing on implementing the dual tasks of effectively fighting the pandemic and protecting people’s health, along with capitalising on opportunities to boost economic recovery and development in the context of a new normal,” PM Phuc said.

Internal strength

The government reported to the legislature that the macroeconomy has continued its stability, with improvements in growth quality and the economy’s major balances.

Specifically, the economy grew at a relatively high level, at 6.8 per cent annually in the 2016-2019 period. This year, despite grave impacts of COVID-19, the rate was 2.1 per cent in the first nine months, and estimated to be 2-3 per cent for the whole year.

“This would mean that Vietnam will be among nations with the highest growth in the region and the wider world thanks to its internal strength and its ability in diversification and flexibility,” PM Phuc noted. “The GDP scale has increased by 1.4 times against 2015. According to the International Monetary Fund (IMF), Vietnam may become the fourth-largest economy in ASEAN in 2020.”

Over a week ago, the IMF released its latest forecast that Vietnam will be among a few nations expected to see positive economic growth this year, at 1.6 per cent, before bouncing back to 6.7 per cent in 2021. GDP for 2020 will likely be over $340 billion, higher than Singapore’s expected $337 billion.

Moreover, the IMF also predicted that Vietnam’s per capita average income will increase from $3,416 last year to about $3,500 this year.

Latest figures from the Vietnamese government showed that in 2020, Vietnam’s GDP is estimated to be about $268.4 billion, up 2.49 per cent on-year. Also, despite COVID-19, the number of newly-founded enterprises in 2020 is estimated to be 137,000 registered at VND2 quadrillion ($87 billion).

Rare resilience

Nguyen Minh Cuong, principal country economist from the Asian Development Bank (ADB), told VIR that the economic prospect in the near term is difficult, with the global economic downturn and domestic weakness proving worse than expected.

“However, Vietnam is showing stronger resilience than most comparable economies, and the economy’s outlook over the medium and long term remains positive. Economic fundamentals have not been impaired, and Vietnam looks likely to benefit from current trends in global patterns of trade, investment, and production,” Cuong said.

A few weeks ago, the ADB revised down its forecast for Vietnam’s economic growth to only 1.8 per cent in 2020 and 6.7 per cent for 2021.

“However, 1.8 per cent remains good, especially when many nations are forecast to suffer from negative growth this year,” Cuong said. “Notably, foreign direct investment (FDI) will continue being a key driver of the economy. I think more of this investment will continue coming to Vietnam which is considered an attractive market with its growing middle class and big consumption. Vietnam is strongly improving its business climate too, with a rise in business sentiment.”

The government estimated that in the whole of 2020, total FDI into Vietnam, including newly-registered, newly-added, and stake acquisition-based capital, will be $34-35 billion, down 10.1-12.8 per cent on-year. Total disbursed FDI will be $19-20 billion, down 1.9-6.8 per cent on-year.