Vietnam’s economy picks up where it left off last year with a positive performance in the first month of 2021.

Handling of first container in 2021 at Hoang Dieu port, Hai Phong city. Photo: An Dang

In January, the country’s industrial production surged by 22.2% year-on-year, in which manufacturing and processing, a key driving force for growth, rose by 27.2%.

Such high growth came from strong production expansion of key industrial products, including phones and parts (71.5%); steel (63.4%); vehicles (38.2%); cement (35.8%); and milk powder (31.1%).

Growing demands ahead of Tet holidays led to an expansion by 6.4% year-on-year in January in total retail sales of consumer goods and services in Vietnam to VND480 trillion (US$20.83 billion).

Meanwhile, the consumer price index (CPI), a main gauge for inflation, slightly increased by 0.06% month-on-month. This resulted in a 0.27% month-on-month growth in the core inflation rate.

New business formation saw an increase both in terms of number and registered capital in the first month of the year, standing at 10,100 newly established enterprises or an increase of 21.9% year-on-year. Total new and additional registered capital pumped into the economy by enterprises in January rose by 10.5% year-on-year to VND395.1 trillion (US$17.14 billion).

Challenges remain

Economist Nguyen Minh Phong said while key economic indicators in January remain positive, the economy is set to go through a rough path amid a Covid-19 resurgence.

According to Mr. Phong, a modest rise of 0.06% month-on-month in inflation rate indicated slow recovery in domestic consumption.

While there has been a strong growth in new businesses, Mr. Phong also pointed out a 54.3% surge in the number of enterprises temporarily suspending their operation at 18,100.

“More supportive policies needed to aid the business community affected by the pandemic, particularly in taxes, technologies and financial leverage for large scale projects with high spillover effects,” said Mr. Phong.

“Innovation and R&D should be the focus for local enterprises, which in turn would benefit national competitiveness in long-term,” he noted.

While the pandemic continues to put pressure on the economy, there remain factors that could serve as a boost for growth, including exports and public investments, added Mr. Phong.

Phan Duc Hieu, vice director of the Central Institute for Economic Management (CIEM), said Vietnam’s effective measures against the pandemic is fundamental to keep the business running.

“In long-term, it is essential to continue improving the business and investment environment and take advantage of new business models to ensure sustainable economic growth,” Mr. Hieu stated.