The excellent pandemic containment and the Vietnamese government support policies present stability in the social, political, and economic environment. In this way, Vietnam has become a hot spotlight for global investors with promising investment opportunities for future business development. In 2022, Vietnam economic growth is calculated to grow beyond expectations as domestic demand recovers, and foreign direct investment (FDI) inflows tend to increase.
Vietnam economic growth in GDP: 2021 and Q1/2022
In 2021, the outbreak of the Covid-19 pandemic seriously wounded many nations’ economies. Thus, the global economy fell into recession and has only slowly rebounded. Without exception, Vietnam’s economy was unavoidably negatively affected, with most economic indicators falling sharply.
Noticeably, Vietnam still keeps a positive GDP growth of 2,91%, and the inflation rate is within the allowed level of the National Assembly. Vietnam’s stock market in the Covid-19 pandemic also recovered, and liquidity improved. The surge in the number of new investors has increased funding for the stock market by 20%.
According to the General Statistics Office (GSO), GDP growth slowed to 5.03% year-on-year in the first quarter of 2022, higher than the 4.72% growth rate last year’s same period. Meanwhile, Vietnam’s inflation in 2022, according to the IMF’s forecast, will be around 3.9%. Mr. Nguyen Bich Lam, former Director of the GSO, added that the number could reach as high as 4-4.5% and increase to 5-5.5% in 2022.
Regarding the outlook, United Overseas Bank economists Suan Teck Kin and Peter Chia commented:
“Taking into account Q1 2022 GDP data releases and the headwinds ahead, we are keeping Vietnam’s 2022 GDP growth forecast at 6.5% (which was already adjusted down from the previous projection of 6.8%). While inflationary pressures are increasing, there is still room for the State Bank of Vietnam (SBV) to keep its policy rates for the recovery efforts, especially under uncertainty posed by the Russia-Ukraine Conflict.”
GDP is estimated to grow notably faster this year than in 2021, thanks to a higher consumer and capital spending expansion. A robust external sector, accompanied by the recently approved Program for Recovery and Development, should also enhance the activity. Still, the outbreak of new Covid-19 strains, rising oil and gas prices due to the recent Russia-Ukraine Conflict, and tight monetary policy among major trading partners have clouded the outlook.
Potential Growth regarding FDI
Lifting pandemic-related restrictions has also supported service activities. The retail sector performed better in the first quarter than in the fourth quarter of 2021. This trend may continue as travel restrictions are further loosened. In addition, the industrial and construction sectors gained momentum, turning 6.4% in the first quarter of 2022, owing to healthy gains in production. Though the most recent Covid-19 wave and the Russia-Ukraine Conflict induced rising fuel, transport, and input material cost, as well as a labor shortage, Vietnam industries have made a gradual promising recovery.
FDI entrepreneurs have also raised imports of materials for order fulfillment. Additionally, the manufacturing sector is likely to grow more than projected. The influx of FDI supports the long-term growth outlook for the manufacturing industry, said Michael Kokalari, Chief Economist of VinaCapital. He remarked that despite the COVID-19 pandemic, Vietnam has been an attractive destination for FDI inflows during the last two years. Furthermore, Vietnam’s rapid vaccination campaign is likely to help attract more robust FDI inflows shortly. For instance, LEGO Group of Denmark, which is known for its sustainable commitment, will build the company’s first zero-carbon factory in Vietnam. This investment aligns with Vietnam’s ESG (environment, social, and governance) values.
Though the inflation rate in Vietnam is estimated at 3.9% (IMF, 2022), the Chief Economist of VinaCapital assured that foreign investors should not be overly concerned about inflation. The inflation rate has skyrocketed to over 7% in many countries worldwide, including the United States, but it has not been recorded in most developing countries in Asia, including Vietnam.
With the dynamic and favorable FDI environment, the Vietnam market has gradually grabbed the attention and interest of foreign investors. Thus, Vietnam will be a worthwhile country for investors and FDI companies for investment cooperation at the moment.
Vietnam Economic Growth Forecast in 2022.
According to global economic experts, the new variants of Covid-19 and the Russia-Ukraine Conflict will further complicate and worsen the global economic outlook.
Yet, hopefully, the economy of Vietnam in 2022 will grow more significantly than in the previous year (5.3% – according to the forecast of Worldbank), thanks to preferential policies for economic recovery, new-generation FTAs, and robust FDI inflow, among others. Since the beginning of 2022, the Government has set two goals: protecting people’s health while preparing a state budget for 2022 and the next three years. These targets aim to strengthen the stability of Vietnam’s society and economy.
Vietnam is well on its way in terms of total export values. For the first four months, the exports of Vietnam had a surplus of 2.53 billion USD, doubling the same period last year. This can be attributed to 17 new-generation FTAs, especially RCEP, EVFTA, and CPTPP. With the FTAs in effect, Vietnamese exporters can benefit from favorable conditions, thereby enhancing further export volume.
By and large, Vietnam still maintains macroeconomic stability and is on a V-shaped recovery trend. It can be claimed that Vietnam has a potential market and is one of the most successful countries in the world in the containment of pandemics. Vietnam’s economic outlook looks bright, promising new investment opportunities for international investors in the coming time. As one of the leading consulting firms with insightful knowledge of Vietnam’s markets and environment, Viettonkin is confident in assisting you through the process of setting up a new business here. Let us be your trustworthy partner!