Vietnam's economic growth forecast lowered for 2021

Vietnam's economic growth outlook has been clearly impacted by the fourth outbreak, but prospects still look positive. Photo: unsplash

Standard Chartered continues to forecast strong growth for Vietnam in this year and the next, with forecast of 6.5 per cent in 2021, slightly lower than the previous forecast of 6.7 per cent. The bank maintains its 7.3 per cent growth forecast for 2022, continuing to expect a post-COVID-19 economic acceleration. The current COVID-19 outbreak may pose downside risks to the forecast.

“We believe Vietnam is moving towards its goal of becoming a regional supply-chain hub, a modern industrial economy, and a high-income country in the future. Vietnam managed the COVID situation well in 2020, further enhancing its appeal to foreign investors. The country has already benefited from the ongoing supply-chain shift in recent years. In the near term, the country’s pandemic management will be crucial to the outlook,” said Tim Leelahaphan, economist for Thailand and Vietnam, Standard Chartered.

Standard Chartered’s economists anticipate domestically-oriented sectors such as retail sales are likely to be the hardest-hit if the current COVID-19 wave persists. The focus now is on whether the impact on the industrial sector will be temporary or more long-lasting. While the global pandemic has weighed on Vietnam’s economy via reduced tourism, supply-chain disruptions and weaker overseas demand, external indicators are showing a strong recovery. First-half exports rose 28.4 per cent on-year and imports rose 36.1 per cent.

The ADB has lowered Vietnam's economic growth forecast this year to 5.8 per cent from 6.7 per cent in April in its Asian Development Outlook (ADO) 2021 Supplement: Renewed Outbreaks and Divergent Recoveries published in July.

The report says that GDP growth in Vietnam accelerated from 1.8 per cent in the first half of 2020 to 5.6 per cent in the same period this year as global recovery boosted exports, and despite disruption caused by a new wave of COVID-19 starting in late April.

Mobility restrictions drove the composite Purchasing Managers' Index (PMI) down to 44.1 in June 2021, the lowest reading since May 2020. Meanwhile, vaccination delays and an extended lockdown in Vietnam’s largest growth area may restrict mobility and limit economic activity in 2021, according to the ADB.

The Ministry of Planning and Investment said that if the fourth wave of COVID-19 pandemic is controlled in July, Vietnam's economic growth will reach 6 per cent. The Central Institute for Economic Management also forecasts Vietnam's economic growth at 6.2 per cent in the best scenario.