Upbeat on Vietnam’s economic outlook in 2022

VNDiect expected strong external demand for Vietnam’s exports in 2022.

Vietnam’s headline inflation slowed to 1.8% YoY in Oct (vs. 2.1% YoY in the previous month. On a month-on-month basis, headline CPI declined 0.2% vs. Sep level, as the food & foodstuff index slid 0.2% mom amid lower live hog prices which average at VND42,460/kg in Sep 2021 (compared to an average level of VND51,271/kg in Sep 2021) and the accommodation & construction materials price index dropped 0.3% mom after the government agreed on a plan to reduce electricity bills during Sep-Nov period for electricity users affected by the fourth outbreak. 

For 10M21, headline CPI averaged at 1.8%, which was far below the government’s target of 4.0%. VNDirect maintained its forecast of the 2021F average headline CPI increase of 2.0-2.2% YoY.

VNDirect said some bottlenecks to the economic recovery are still existing, including (1) domestic consumption demand stays low in the 4Q21 due to lower consumers’ income amid the prolonged pandemic and (2) many industrial parks in Ho Chi Minh City and other Southern provinces still face labor shortages. In addition, the number of daily new cases has bounced back strongly since late October amid the reopening of the economy. The risk of a resurgence of the COVID-19 pandemic could halt the reopening of the economy, especially in the service sector. 

As uncertainties emerge, this stock company revised its forecast for 4Q21 GDP growth to 3.3% from a previous forecast of 4.0% and projected Vietnam’s GDP rising by 7.5% in 2022, with resilient growth in all sectors. Its forecast is based on the following key assumptions.

First, the global economy would remain strong growth momentum in 2022. The International Monetary Fund (IMF) forecast the global economy to expand by 4.9% YoY in 2022. Noted that, the global economic growth rate averaged around 2.8% per year in the period 2016-2019 (before the COVID-19 pandemic). Therefore, VNDiect expected strong external demand for Vietnam’s exports in 2022.

Second, 70-75% of Vietnam's population would be fully vaccinated against COVID-19 in 1H22. VNDiect expected that a high vaccination rate would help Vietnam successfully contain the pandemic.

Third, the international commercial flights could be resumed from 1Q22, which would support the recovery of the tourism industry in 2022, one of two main drivers for a rebound in Vietnam’s services sector, along with the recovery in domestic demand.

Fourth, VNDiect expects the government to maintain loose monetary and fiscal policies until at least late-2Q22 to support economic growth. It also expects a large increase in the country’s investment capital in 2022 as the government continues to accelerate the disbursements of public investment. The investment capital of the non-state sector, as well as the FDI sector, could also recover strongly, thanks to a more favorable business environment after the pandemic.

Regarding the sub-sector, VNDiect expected the agriculture, forestry, and fishery to grow by 2.8% YoY, the industry and construction sector by 8.6% YoY, and the services sector by 8.1% YoY in 2022.