In 2022, consumer spending will begin to return to conventional patterns with an estimated growth of 5.7% year-on-year to a total of VND2,113 trillion (US$92.7 billion).

The rate, however, would still remain below the pre-Covid-19 levels of 7.3% recorded in the 2015-2019 period, noted Fitch Solutions, a subsidiary of the Fitch Group.

According to Fitch Solutions, the estimated consumer spending growth stays in line with the agency’s forecast of economic growth by a real rate of 8% year on year.

“The main driver of economic growth will be the rebound in consumer spending, as well as growth in net exports,” Fitch Solutions added.

Meanwhile, looser Covid-19 containment measures in Europe, the US, and China, encouraged by rapid vaccination progress lead to better business optimism around the outlook for consumer spending, and this is likely to feed into stronger order books for Vietnamese exporters, it noted.

In October 2021, Vietnam retail sales declined 19.5% year-on-year, but the figure showed significant improvements from the -33.7% slump recorded in August.

The latest reading marked the sixth straight month of contraction in retail trade, as the nation continues to see rising daily cases of the fast-spreading Delta-variant outbreak starting from the end of April 2021.

When compared to September 2021, retail sales were up by 18.5% month-on-month as the market in a number of localities gradually recovered, with the reopening of many traditional markets.

Vietnam's Ministry of Industry and Trade (MoIT) forecast retail sales of consumer goods and services to increase by 3-4% by the end of 2021, which could be realized by further promoting the circulation of goods across the domestic market and boosting the application of e-commerce in their circulation and distribution.

A customer at Hapro Thanh Cong in Hanoi. Photo: The Hanoi Times

Inflation outlook

In 2021 and 2022, inflationary pressures are rising in many countries globally as base effects, higher commodity prices and supply-chain challenges create localized shortages.

Fitch Solutions expected that rising consumer price inflation is a key risk to consumer spending over the remainder of 2021, as it has the potential to erode purchasing power.

In Vietnam, it noted that inflation has been ticking up in recent months, reaching 2.8% year-on-year in August 2021. However, the inflation rate is set to average at 2.2% in 2021, below the government’s threshold of 4.0%.

“While high global commodity prices will put upside pressure on inflation, this should be counteracted by weak demand owing to ongoing lockdowns which will limit the ability of businesses to raise prices,” stated Fitch Solutions.

Subdued inflation and consumer demand will mean the State Bank of Vietnam will not tighten monetary policy and credit conditions, although some targeted measures are likely to rein in risks in the financial markets in 2022, it continued.

In 2022, Fitch Solutions projects inflation to average 3.2%, as domestic demand recovers, assuming much easier containment measures as Vietnam gets its Covid-19 outbreak under control, supported by improved vaccination progress.