Vietnam’s economic growth forecast this year is revised down to 3.8% from the previous estimated 6.7% in April due to the prolonged Covid-19 outbreak but would rebound strongly to 6.5% in 2022.

ADB Country Director for Vietnam Andrew Jeffries at the online meeting. Photo: Nguyen Tung

ADB Country Director for Vietnam Andrew Jeffries gave the statement at the online launch of the latest report Asian Development Outlook (ADO) 2021 Update held today [September 22].

According to Andrew, growth picked up in the first half of 2021, largely because of higher trade volumes, but slowed down in the second half of the year as the fourth wave of the pandemic took a toll on business and the labor market.

“The prolonged Covid-19 pandemic and extended lockdowns have weakened consumption and investment, hampering Vietnam’s growth prospects," said Andrew. “But the Vietnamese economy will bounce back if the Covid-19 pandemic is brought under control by the end of 2021 and 70% of the country’s population are vaccinated by the second quarter of 2022,” he added.

ADB remains bullish on the country’s prospects in the medium and long term. Growth could be aided by a revival of domestic demand, an acceleration in the disbursement of public investment funds, and an expansion to new export markets thanks to multiple free trade agreements and the expected global economic recovery.

The near-term outlook remains challenging, with the main risk being a prolonged pandemic, especially if the country’s vaccination rate does not increase significantly. Growth also depends on the government’s timely delivery of necessities, such as food and cash, to vulnerable groups affected by the pandemic, Andrew stated.

“Vietnam can benefit from removing administrative hurdles to business and people, and accelerating digital transformation, which will help improve the efficiency of pandemic containment measures and support a sustainable economic recovery this year and next,” he added.

ADB's GDP growth forecast for Vietnam.

Clear pathway to reopening key to keep hold of investors

Principal Country Economist for Vietnam Nguyen Minh Cuong noted the fast recovery of Vietnam’s main overseas markets, particularly the US, EU, and China, will support exports, especially textiles, garments and footwear, electronics, and mobile phones.

“But the lockdown on major industrial hubs in the Mekong Delta will constrain production capacity, triggering a shift of orders to other countries, as 18% of European companies doing business in Vietnam already did in July and August,” Cuong said.

On this issue, ADB Director Andrew said Vietnam remains an attractive investment destination in Southeast Asia.

He noted the country is not the only one in the region and the world facing difficulties from the pandemic.

“Foreign investors come to Vietnam as they look at the fast-economic expansion rate and growing middle class,” he told The Hanoi Times, noting foreign companies’ bases in Vietnam are not only for exports but also to meet domestic needs.

Andrew stressed the issue for foreign investors does not lie on the pandemic itself as Covid-19 is spreading worldwide, but how each country carries out its restriction measures and a clear pathway towards reopening.

“Investors would be more settled if they are informed of the Government’s plan on the timing for economic reopening or at least an estimated time frame, as everyone knows lockdown is only temporary solutions,” he said.