Although Vietnam did not achieve its 2021 economic growth target, economists and international organizations point to bright spots that are important foundations for growth in 2022.
Bright spots
Nguyen Bich Lam, former Director General of the Ministry of Planning and Investment’s General Statistics Office of Vietnam said the first bright spot is the Vietnamese business community that has been very dynamic and flexible in facing pandemic-related difficulties. In the 11 months of 2021, some 105,600 new enterprises registered with authorities and 49,500 businesses resumed operations, taking the total number of operational enterprises to 146,100 in the first 11 months of 2021.
The second bright spot is foreign direct investment (FDI) in the country. In the first 11 months of 2021, Vietnam attracted an additional US$26.46 billion in FDI capital, and is expected to attract almost US$30 billion for the year, a slight increase compared to 2020.
The third bright spot is Vietnam’s improved position in international trade. Despite the broken supply chain that confronted manufacturers and exporters with difficulties in terms of input materials, transportation fees and logistics, in the first 11 months of 2021, Vietnam earned US$299.67 billion from exporting goods (up 17.5 percent from the same period last year) and imported goods worth an estimated US$299.45 billion (up 27.5 percent).
“Imports as means of production amounted to an estimated US$280.2 billion, up 27.9 percent and accounting for 93.6 percent of the country’s total import value,” Lam said. Foreign trade in the first 11 months of 2021 experienced a significant shift, moving from a trade deficit of US$3.7 billion in the first nine months to a trade surplus of US$225 million, he added.
Important driving force
The International Monetary Fund’s (IMF) World Economic Outlook released in October 2021 forecast that Vietnam’s economic growth could reach 6.6 percent in 2022, the highest growth forecast for the surveyed countries –Thailand, Indonesia, the Philippines, and Malaysia. Also expressing optimism about Vietnam’s economic growth and recovery in 2022, Standard Chartered Bank expects Vietnam’s GDP growth to reach seven percent in 2022.
According to Deputy Minister of Planning and Investment Tran Quoc Phuong, once approved, the 2022-2023 socioeconomic recovery and development program will support both supply and demand activities and will be implemented on a flexible basis and in accordance with fiscal and monetary policies, the 10-year socioeconomic development strategy, five-year socioeconomic development plan, public investment plans, five-year financial plan, and the economic restructuring plan.
A 2021-2025 economic restructuring plan was approved by the National Assembly, constituting an important driving force to attract domestic and foreign resources for economic recovery and acceleration, Phuong said.
There is room for higher growth in 2022 and the following years, however, the Vietnamese economy still has shortcomings, some of which include the high rate of enterprises withdrawing from the market in the first 11 months of the year – 54.4 percent, and tardy disbursement of public investment capital (only 73.8 percent of the 2021 target in the first 11 months, down 8.7 percent compared to the same period in 2020). While Vietnam’s export value reached an impressive figure of US$299.67 billion, the domestic economic sector only accounted for US$79 billion of that amount, or 26.4 percent of the total, and increased only 11.1 percent (compared to 20 percent growth by the foreign invested sector). That means that Vietnam’s international trade position is created by the FDI sector. Agriculture and fisheries that should be driving forces of economic development are still facing numerous difficulties.
In that context, according to economists, apart from controlling the pandemic and creating favorable conditions for businesses, Vietnam needs a harmonious combination of financial and monetary policies, and should not focus too much on monetary policies only in as much as they remove difficulties and promote growth.
| Oxford Economics forecast that Southeast Asia would reach a growth of 6.1 percent and become the world’s fastest growing economic region, and Vietnam would achieve a GDP growth of more than six percent in 2022. |
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