KTFA: Samson: Việt Nam’s economy is developing rapidly: expert
14th July, 2022
According to the General Statistics Office, in the first six months of the year, Việt Nam’s economy showed signs of growth, such as a strong increase in the service industry and a rising number of newly-established enterprises.
In the first six months, Việt Nam’s GDP grew by 6.42 per cent on year, with GDP growth in the second quarter at 7.72 per cent on year – the highest level for the past 10 years. Meanwhile, global economic growth has been forecast to decrease after the COVID-19 pandemic and due to the conflict between Russia and Ukraine.
Dr Trần Thị Hồng Minh, director of the Central Institute for Economic Management (CIEM), Ministry of Planning and Investment, spoke to Vietnam News Agency about the prospects for economic recovery.
Việt Nam’s economy has seen an impressive recovery in the first six months with many positive indicators. Which sector had the most impressive growth in the first half of this year?
During the six months, there were many sectors that overcame difficulties caused by COVID-19.
Việt Nam in the first half of this year achieved impressive growth of 17 per cent in exports and 15 per cent in imports compared to the same period last year. It showed that Vietnamese enterprises had a strong recovery and the Government has introduced policies relating to economic integration via new-generation free trade agreements. Those agreements have had very positive effects on economic activities in general as well as on import and export activities.
Another point is that the number of newly-established enterprises in the first six months of the year also surged by 14 per cent on year to more than 70,000. The number of businesses returning to the market also increased strongly by 55 per cent to about 40,000. According to CIEM’s survey, 85 per cent of enterprises in the processing and manufacturing sector believed that there would be good trends in their production and business.
What was the role of the Government in the recovery?
The Government has had effective policies in the prevention of COVID-19, as well as policies of opening borders, opening air routes as well as economic recovery, such as Resolution 11 on economic recovery and development programme. With this programme, the businesses can get timely support from the Government in accessing capital and favourable policies to restore and develop production after many waves of the pandemic.
Which sectors still had low growth after the pandemic?
There were still sectors that suffered the impacts of the pandemic in general and also other difficulties of the domestic and world economies.
For example, in the tourism industry, the number of domestic tourists had high growth in the first six months of the year, especially in the last month of the first half. However, the segment of foreign tourists was still low. The number of foreign tourists in the first six months had a growth rate of 5 per cent. This was due to the pandemic, inflation and different policies in preventing COVID-19 in other countries. The number of foreign tourists is expected to increase in the second half of this year.
What risks does the Vietnamese economy face?
In the last six months of this year, besides the advantages, Việt Nam’s economy still faces many risks and challenges. First, Việt Nam still has to spend a lot of time and resources to control the COVID-19 pandemic most effectively. Secondly, from now until year-end, other diseases such as monkeypox and dengue fever will still create risks to the domestic economy.
Besides that, there are still problems related to inflation. Inflation not only occurred in the first six months of this year, but from 2021, this issue attracted great concern among many governments when commodity prices increase.
Last year, according to an international economic organisation, there were goods having price increases of 60-70 per cent. In the first six months of 2022, inflation is still present, causing many negative impacts on world economies, for example, France and the US are facing the highest inflation in the past 40 years.
Việt Nam also faces risks because the pandemic has disrupted the supply chain, affecting production and business, and input materials, so the price of raw materials has increased. The conflict between Russia and Ukraine has partly led to rising inflation. Therefore, one of the Government’s goals is to control inflation as much as possible to support businesses and people to overcome difficulties in this period.
Public investment is considered an important factor to promote economic development. However, in the first six months of the year, disbursed public investment capital was very low. What are the solutions for this issue?
Recently, the Government has established six working groups of local ministries and sectors to strengthen supervision and promote public investment. We believe that to gain efficiency in public investment, it is necessary to strengthen management ability for public investment projects and clarify the responsibilities of the processes in the disbursement of public investment.
In addition, Việt Nam must improve the institutional system supporting public investment, including the public investment law and related laws such as land law and mineral law. Việt Nam needs a comprehensive solution package to effectively disburse public investment in the future.
How do you forecast the ability to fulfil the economic growth target?
In the context of many fluctuations in the domestic and global economy, Việt Nam needs to restructure the economy. This issue is already present in the Resolution on economic renewal approved by the National Assembly at the end of 2021 and is currently being implemented in localities around the country.
In addition, the Ministry of Planning and Investment has directed CIEM to research a new economic growth model based on taking advantage of Industry 4.0.
In April and June, the ministry submitted two important projects to get approval from the Government: a scheme on linking regions to exploit the potentials of localities; and a circular economy development project. Those short- and medium-term solutions are expected to help Việt Nam achieve the economic growth target of 6.5 per cent in 2022. LINK
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Samson: Standard Chartered: Việt Nam on course for a strong recovery
13th July, 2022
Standard Chartered Bank maintains its GDP growth projection for Việt Nam at 6.7 per cent for this year and 7 per cent for 2023.
The forecast is highlighted in the Việt Nam section of the bank’s recently published global research report titled Global Focus – Economic Outlook Q3-2022: Near the tipping point.
“Việt Nam’s economic recovery has shown signs of broadening; macroeconomic indicators continued to recover in June. The recovery may accelerate markedly in second quarter of the year, particularly as tourism reopens after a two-year closure. That said, rising global oil prices may have negative consequences for the economy,” said Tim Leelahaphan, Economist for Thailand and Việt Nam, Standard Chartered Bank.
According to Standard Chartered Bank’s economists, 2022 and 2023 inflation is forecast at 4.2 per cent and 5.5 per cent respectively. Inflation remains under control for now. The fuel component of inflation has increased, while other components have been relatively low. Price pressures – particularly for food and fuel – may increase later in 2022 and in 2023. This could pose a risk to the nascent recovery in domestic consumption. Elevated inflation could also result in search-for-yield behaviour or increase financial instability risks.
Standard Chartered Bank expects the State Bank of Vietnam (SBV) to keep the policy rate on hold at 4 per cent in 2022 and policy normalisation to take place in the fourth quarter of 2023, with a 50 basis point (bps) hike to 4.5 per cent.
“The SBV is likely to stay vigilant against inflation and financial instability, particularly amid ongoing geopolitical risks, although we expect it to stay accommodative this year to support businesses. It has not signalled a change in its stance yet, and Việt Nam’s economic recovery has just started. However, we see a risk that the SBV may raise rates earlier than we expect, given rising inflation and a weaker-than-expected Vietnamese đồng – especially if the Fed maintains a relatively hawkish stance,” Tim said.
The UK-backed bank raises its USD-VND forecasts to account for pressure on the goods trade balance from elevated commodity prices, with USD-VND projected at 23,000 at end-Q3-2022 and 22,800 at end-Q4-2022. The bank expects sharp Vietnamese đồng appreciation next year, along with a likely rebound in Việt Nam’s current account surplus.
The marcro-economic study also points out three factors could adversely affect Việt Nam’s economic outlook, including new COVID-19 variants, the lifting of US tariffs on imports from China, and a global recession. Pandemic concerns persist, despite Việt Nam’s shift to a ‘living with COVID-19’ policy.
On the trade front, the White House has said it is reviewing tariffs on some US imports from China to ease inflation; this could slow the pace of investment relocation from China to Việt Nam, reducing FDI inflows to Việt Nam or even resulting in outflows.
Meanwhile, a global recession could hit exporters hard; exports of goods and services are equivalent to more than 100 per cent of Việt Nam’s GDP. LINK
Samson: International organisations hail Việt Nam’s economic achievements
8th July, 2022
HSBC has raised its forecast for Việt Nam’s economic growth this year to 6.9 per cent, from the previous prediction of 6.6 per cent, which is possibly the fastest pace in the region.
In the Việt Nam At A Glance report in July, HSBC Global Research noted that decreasing risks posed by the Omicron variant and eased restrictions have paved the way for Việt Nam to return to normality.
Thanks to widespread recovery, the country recorded an impressive GDP growth rate of 7.7 per cent in the second quarter compared to the same period last year. The service sector, which has suffered severe economic impacts, have bounced back strongly while manufacturing has continued growing and exports hit historic highs. However, the growth forecast for 2023 was revised down to 6.3 per cent from 6.7 per cent due to growing risks, especially in the energy sector, according to the bank.
HSBC Global Research pointed out growing impacts of soaring energy prices. Escalating goods prices have led to a trade deficit in Q2 and may worsen the current account situation, which is already pessimistic. On the other hand, though household consumption has recovered steadily, people’s budgets may suffer from high oil prices, thus decelerating the recent recovery speed.
Việt Nam’s inflation is forecast to stand at about 3.5 per cent this year, but it may surpass the ceiling of 4 per cent between Q4 of 2022 and Q2 of 2023, requiring the State Bank of Vietnam to begin normalising monetary policy.
According to the report, Việt Nam has benefited from its economy reopening, and domestic demand has returned while external drivers remain favourable. However, it is necessary to stay alert to increasing growth risks, especially those posed by surging energy prices.
Meanwhile, the Executive Board of the International Monetary Fund (IMF) has highly valued Việt Nam’s policy support to cushion the impact of COVID-19 in tandem with successful maintenance of fiscal, external, and financial stability and an impressive vaccination rollout.
In a press release following a recent consultation with Việt Nam, the IMF Executive Board said a recovery is underway and high frequency indicators point to stronger momentum going into 2022, with rising retail sales, industrial production, and firm entry. Growth is expected to reach 6 per cent in 2022 as activity normalisation continues and the programme for recovery and development is implemented. However, the recovery of the labour market is lagging as underemployment remains high. While inflation has recently picked up due to rising commodity prices and supply-chain disruptions, it remains well below the central bank’s inflation ceiling.
The Executive Board called for agile policy making, proactively adjusted to the pace of the recovery and evolution of risks. They also underscored the need for fiscal policy to take the lead and be flexibly adjusted to evolving economic conditions. They welcomed the programme for recovery and development and emphasised the importance of targeting, spending efficiency, and steadfast implementation.
The IMF executive board stressed the need for monetary policy to be nimble and vigilant of inflationary risks. They also emphasised the importance of addressing problem loans, normalising regulatory forbearance in a timely fashion, and closely monitoring real estate sector risks.
They welcomed Việt Nam’s recent steps towards greater exchange rate flexibility and monetary policy modernisation and encouraged continued efforts in this direction.
The board stressed the importance of structural reforms to improve the business environment, enhance productivity, and boost potential growth. They also praised Việt Nam’s ambitious environmental agenda and urged the translation of targets into concrete policy actions. LINK
