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The General Statistics Office of Vietnam (GSO) has recently published the official GDP growth rate of Vietnam to be 13.67% in Quarter III. Notably, the first 9 months of 2022 has recorded an incredible 8.83% growth in GDP, highest since 2011.
The strong recovery of Vietnamese economy
This record-breaking pace of growth demonstrates that production and business activities are recapturing their growth momentum at a remarkable speed, and that the Government’s policies of socio-economic recovery and development proved their effectiveness.
In particular, the agriculture, forestry and fishery industry increased by 2.99%, contributing over 4% to the overall economic growth. Among all sectors within the industry, agriculture contributed the most, with an increase of 2.43%.
Meanwhile, industry and construction experienced a 9.44% increase, comprising nearly 42% of the GDP structure. The manufacturing and processing sector is the primary economic driver, with a 10.69% growth rate.
Similarly, the service sectors also reached 10.57% upturn, accounting for over half of the total GDP growth. Noticeably, the top three sub-sectors devoting to growth of this sector are accommodation and food services, transportation and warehousing, and wholesale and retail with 41.7%, 14.2% and 10.24% increase respectively, compared to the same period last year.
According to Ms. Nguyen Thi Huong – General Director of the GSO, this 8.83% GDP growth is magnificent, especially in light of the current challenges of the global macro-economic atmosphere, with rising inflations, frozen supply chains, and rising energy costs, among others. Vietnam has also managed to keep its inflation rates at bay, helping maintain the stability of the consumer market and daily economic activities. These signals paint a picture of a bright economic outlook with promising growth opportunities for Vietnam in the last months of 2022.
The reasons behind this astounding GDP growth
The effective economic recovery policies of the Vietnamese Government post Covid-19
Vietnam’s policies in response to Covid-19 have proved their effectiveness at a high level, earning the appreciation and admiration from many international counterparts. More than 80% of the Vietnamese population has been vaccinated with a full dose of any Covid-19 vaccine, compared to the average 61.4% of the world population. Thus, the number Covid-19-related of infections and deaths in Vietnam has been declining drastically.
“The successful containment of the pandemic is the primary foundation of maintaining a stable society and reassuring people’s concerns. This will revive, stabilize and develop all economic activities”, stated the representative of the GSO.
In addition, support policies to production and social security have been issued in a timely manner and to the right receivers. In this way, the policies have helped to restore production, at the same time ensuring safety and well-being for all citizens. Specifically, since the beginning of 2022, the Government has issued Resolution No.11/NQ-CP on the Socio-economic Recovery and Development Program. It aims at recovering production and business activities while promoting growth activities, stabilizing the economy and ensuring social security for people.
At the same time, Resolution No. 43/ 2022/QH 15 on fiscal and monetary policies has been introduced to support the Program. The resolution ensures that enterprises and people will soon benefit from exemption, reduction of tax and charges policies, facilitating invoice issuance, tax declarations & submission and united implementation across the country.
Policies to support production through the Economic Recovery Support Program 2022- 2023 will create momentum for the economy to develop in the coming time. As a result of the support policies, business registration has achieved remarkable outcomes. In the first 9 months of 2022, 163 thousand enterprises registered for new establishments and resumed operation, an increase of 38.6% over the same period last year. On average, there are over 18,000 newly established and re-operated businesses on a monthly basis.
The promotion of private-public investment and foreign direct investment (FDI)
The Vietnamese Government determines focused investment projects in major and significant industries to enhance the effective use of public funding. In this way, Deputy Prime Minister Le Minh Khai has just signed Decision No. 1126/QD-TTg on adjusting and supplementing the estimates for the 2022 central budget in investment and development expenditure. In particular, VND 19,570,446 billion has been supplemented for 10 ministries, central agencies and 36 localities to perform tasks and projects under the medium-term public investment plan in the period 2021-2025.
On the other hand, several policies of the Vietnamese government, namely Resolution No. 105/NQ-CP, Resolution No. 128/NQ-CP, among others have reassured the FDI business community. This explains the considerable size of foreign investment flows into Vietnam.
As of September 20, 2022, total registered foreign investment capital in Vietnam reached nearly USD$18.75 billion, down 15.3% compared to the same period in 2021. Yet, the realized foreigin direct investment in Vietnam was estimated at USD$15.43 billion, up 16.3% over the same period last year. This is the highest amount of FDI capital realized in any 9-month period for the past 5 years.
Vietnam as an essential part in the global value chain
The global value chain has still fallen into severe disruption due to the destructive Covid-19 pandemic and the tension of Russia-Ukraine conflict. As an account of Ms. Do Thi Thuy Huong – Vice President of Vietnam Association of Supporting Companies (VASI), the turbulence in the global socio-economic scenario, along with strict Zero-Covid policy of Mainland China has pushed “giant” manufacturers out of China. At the same time, these eyed Vietnam as their next destination for basing middle – and long-term manufacturing plants.
Recently, Apple has moved 11 manufacturing plants in its global supply chain to Vietnam. Meanwhile, Foxcom, Luxshare, Pegatron and Wistron also expanded their existing production facilities in Vietnam. Samsung is building the largest regional Research and Development center worth USD$220 million in Hanoi, Vietnam. Early in this year, it plans to expand factories in Bac Ninh and Thai Nguyen, while still investing an additional USD$3.3 billion in Vietnam. This shift will benefit and move Vietnam up the global value chain.
The reason behind this trend not only lies on the external factors, but also in Vietnam itself. Vietnam has maintained its stability in the political environment while developing its economy. The successful containment of Covid-19 by the Vietnamese government has created tremendous favorable conditions for foreign investors to enter the market.
In addition, according to Ms. Nguyen Thi Huong, the government’s timely decisions to lift up restrictions and open borders have solved the backlogs of the economy. The commercial activities have flourished, while the service sectors recovered rapidly, and travel and transportation improved. She assessed that 2022 and the upcoming time will be the ideal time for opportunity seekers in diverse economic sectors. These factors have made the domestic supply chain resilient compared to the current disrupted global one.
Low and controlled inflation rate
As for the GSO, the domestic price level is generally under control although world inflation continues to rise. The consumer price index (CPI) in September, 2022 increased by 3.94% over the same period last year. Meanwhile, the average CPI in the third quarter and nine months rose by 3.32% and 2.73%, respectively. Inflation rate in Vietnam overall witnessed a slight 1.88% rise.
Last month, inflation in EU countries hiked to a record high of 9.1%, while inflation in the US reached 8.5%, forcing the US Federal Reserve (Fed) to raise interest rates for the 5th time. In Asia, Thailand’s CPI in August climbed by 7.9% over the same period last year, whereas Korea’s surged by 5.7%, followed by Indonesia, Japan, and China with 4.7%, 3% and 2.5% increase respectively
Thus, Vietnam maintains to be in the group of countries with low inflation rate compared to the general level.
The GSO also identified several factors leading to the increasing global inflation rate. Most notably, the Russia-Ukraine conflict and supply chain disruption has driven the energy price and the commodity price worldwide.
The low inflation rate of Vietnam is attributed to the proactive response of the government through diverse policies. However, inflationary pressures in the coming months are still present.
The price movement of goods and raw materials in the world is on a downward trend due to the downturn in global economic growth. Yet, the risk of rebound is quite high because of the ongoing intense conflict between Russia – Ukraine
The General Statistics Office.
Accordingly, the government required functional agents to closely update the current situation, hence appropriately assessing and implementing policies. At the same time, they emphasized on the socio-economic recovery and development programs. Most importantly, it is necessary to improve disbursement capacity and effective use of investment capital and focus on investment in key industries and fields.
In short…
The GSO has mapped out two scenarios for economic growth for the year 2022. In the first scenario, annual GDP would grow by 7.5%, which means that Quarter IV’s growth will be 4.14% – the lowest rate for this year. In the second scenario, annual GDP would increase by 8%, equating to a 5.9% growth rate in Quarter IV, slightly higher than the first Quarter yet lower than Quarter II and III. If no sudden and significant upheaval occurs by year end, Vietnam’s economic growth will most likely achieve the latter scenario.
This growth also points at a promising picture for investors, yet also presents underlying risks. In such a context, advice should be sought from top-notch experts with the right local expertise. Viettonkin is one of the leading professional firms with more than 12 year experience in diverse industries and majors. Our team of well-informed professionals in Vietnamese markets and legal systems are capable of assisting you navigate through the process of establishing a new business in Vietnam. With us by your sides, you can focus on what really matters to you. Let us be your trustworthy partner!