Vietnam’s economy continues its rapid recovery after the severe Covid-19 impacts during the 2020-2021 period with estimated GDP growth of 7% for this year and then moderate to a more sustainable growth rate of 6.5% in 2023.

ASEAN+3: AMRO Growth and Inflation Projections, 2022–23.

The ASEAN+3 Macroeconomic Research Office (AMRO) revealed the findings today [October 6] as part of the launch of its flagship report “ASEAN+3 Regional Economic Outlook” (AREO 2022) for the ASEAN+3 region (comprising ten members of ASEAN and China, Hong Kong (China), Japan and South Korea).

The growth forecast also showed an upward revision from AMRO’s projection in July for the country’s economy at 6.3% for 2022, making it among the top performers behind only Malaysia at 7.3%.

“While the low base effect last year [at 2.6% growth in 2021] has been among factors for Vietnam’s high growth, others have also come into consideration, such as the Government’s approach in easing Covid-19 restriction measures, resilient external demand, recovery of the tourism sector, FDI inflows, and effective State supporting measures,” AMRO Chief Economist Hoe Ee Khor told The Hanoi Times.

AMRO Chief Economist Hoe Ee Khor.

Khor noted that as Vietnam’s economy continues its path of recovery, tremendous inflationary pressure is on the horizon in light of a pickup in domestic demand and rising commodity prices.

However, the country’s inflation rate is projected to expand by 3.5% this year, below the Government’s ceiling target of 4%.

AMRO’s report noted in the time ahead pandemic containment remains the major domestic challenge, with the ongoing recovery in domestic demand and export performance resting crucially on the nature of containment measures.

On the external front, while Vietnam is well-placed to benefit from the recovery in global demand in light of the outsize role of exports in the economy and its membership in several free trade agreements, major flareups in Covid-19 infections across the world would continue to pose a significant downside risk for Vietnam’s exports.

Global woes cast a shadow over regional growth

Looking to the region's grim global outlook from the Ukraine-Rusia conflict, energy crisis in Europe, and US’s monetary tightening to combat high inflation prompted AMRO to revise its short-term growth forecast for ASEAN+3 to 3.7% this year, from 4.3% projected in July due to the grim outlook.

The ASEAN region, meanwhile, is expected to grow strongly by 5.3%, and the inflation rate would be 6.2%—a whole percentage point higher than previously forecast.

“A simultaneous economic slowdown in the US and the Euro area, in conjunction with tightening global financial conditions, would have negative spillover effects for the region through trade and financial channels,” said Khor.

In ASEAN+3, inflation is accelerating. Food and fuel prices remain elevated despite recent easing in key global commodity benchmarks, while subsidy cuts in some economies and depreciating currencies have also pushed prices higher.

“Central regional banks are raising policy interest rates to safeguard price stability and support their currencies. However, the pace of monetary tightening has generally been more measured and gradual than in the US and the Euro area,” said Khor.