Vietnam’s economy saw a stronger recovery

 Export values grew 13.2 percent year over year to about $22.9 billion in February 2022, according to GSO data.

>> Vietnamese economy to recover fast in 2022

Industrial production and service recovery

The Index of Industrial Production (IIP) for February 2022 in Vietnam indicates that the industrial sector is expanding rapidly, with manufacturing activity leading the way. To be more exact, the general IIP increased by 8.5 percent year over year, which was greater than the previous month's growth rate of 2.8 percent year over year. Manufacturing climbed by 10.0 percent year over year, energy production and distribution increased by 8.0 percent year over year, waste and wastewater management and treatment increased by 0.8 percent year over year, and mining decreased by 4.1 percent year over year.

In February 2022, Vietnam's PMI reached a 10-month high of 54.3 points (up from 53.7 points in January 2022), indicating that the manufacturing sector had improved significantly. In February, IHS Markit recognizes three highlights for the manufacturing sector in Vietnam: (1) Due to stronger external demand, output and new orders grew at the fastest rate in ten months; (2) the number of new jobs created was modest due to the long holiday as well as the rising number of COVID-19 infections due to the Omicron variant; and (3) input costs increased further due to rising raw material prices.

The service sector, like the industrial sector, grew faster year over year. Due to the reopening of aviation and tourism, gross retail sales of consumer goods and services in February 2022 reached VND421.8 trillion, up 3.1 percent from the same period last year. Revenue from hospitality and travel increased significantly by 12.6 percent yoy and 39.4 percent yoy, respectively. Meanwhile, retail sales increased by 2.4 percent year on year to VND338.9trl. Consumer goods and service gross retail sales increased 1.7 percent year over year in 2M22 (vs. an increase of 0.5 percent yoy in 2M21).

"We expect the service sector to accelerate recovery momentum in the coming months as (1) Vietnam has fully open to international tourists from mid-March and (2) the government has reduced VAT on some goods from 10% to 8% from February 2022 to December 2022, which will stimulate domestic consumption demand", Mr. Dinh Xuan Hinh, analyst of VNDirect said.

Import and export to keep accelerating

As global demand recovers from the epidemic, high vaccination rates allow Vietnam to maintain and strengthen its production capacities, allowing the country to obtain additional external orders. Export values grew 13.2 percent year over year to about $22.9 billion in February 2022, according to GSO data, with local businesses’ exports up 20.3 percent to $5.6 billion and FDI business’ exports up 11.1 percent to $17.3 billion. Vietnam's exports increased 10.2 percent year on year to $53.8 billion in 2M22. 

Among Vietnam’s top exports, the items that recorded the positive growth rate in February 2022 include electric goods and computers (7.4% yoy), machinery and equipment (6.9% yoy), textiles (30.9% yoy), footwear (5.0% yoy), wood and wooden products (15.5% yoy), motor vehicles (14.3% yoy), Fishery (47.2% yoy), steel (11.4% yoy), and cameras and camcorders (36.4% yoy). On the other hand, phone exports continued to decrease by 15.1% yoy in February 2022, after recording a decline of 26.1% yoy in the previous month. However, Mr. Dinh Xuan Hinh expects phone exports to recover in March 2022 after Samsung launches the Galaxy S22 flagship phone on February 9, 2022, which is expected to be delivered to customers globally in late-1Q22.

In terms of imports, Vietnam's import spending climbed by 21.9 percent year on year to approximately US$25.3 billion. As a result, Vietnam had a trade deficit of $2.3 billion in February 2022 (compared to a trade surplus of $1.4 billion in January 2022). Due to the substantial increase in international commodity prices, some commodities, such as gasoline (144.7 percent yoy), coal (114.5 percent yoy), cotton (113.1 percent yoy), fertilizer (103.6 percent yoy), dairy (59.5 percent yoy), and corn (53.2 percent yoy), had higher import values in February.

>> Vietnam will return to a solid growth track in 2022

Public investment keeps on track

According to the GSO, state capital (public investment) was implemented at VND20.5 trillion in February 2022, up 9.9% year on year (versus an increase of 10.7 percent yoy seen in the previous month). Disbursed state capital increased 10.4% yoy to VND46.3 trillion in 2M22 (below the 13.6 percent rate seen in 2M21), or 8.8% of the full-year objective (higher than the 8.0 percent rate seen in 2M21).

Mr. Dinh Xuan Hinh expects public investment implementation to pick up in the following months, as the next economic package's public investment will begin to be deployed in April 2022. The infrastructure investment package (as part of the economic stimulus package) is estimated to be worth VND113,050 billion, with the government expecting to distribute half of it by 2022. However, the implementation of public investment could be jeopardized in the near future if the price of steel, cement, and stone rises dramatically as a result of the Russia-Ukraine conflict and supply chain disruption. "We maintain our projection that the implemented state capital will increase by 20-30% in 2022F compared to the actual implementation in 2022," says the report.