Vietnam's economic outlook for 2022: GDP growth would get a strong recovery

Vietnam's GDP growth is expected to show a strong recovery in 2022. Photo: HCM city

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According to the General Statistics Office of Vietnam, Vietnam’s GDP growth in 2021 is estimated to reach 2.58 percent, up from the previous year. 2021 GDP growth fell short of its 6.5% growth target for the year, with consumer spending declining sharply amid prolonged COVID-19 curbs.

Vietnam’s agro-forestry-fishery sector rose by 2.9 percent, contributing 13.97 percent to the growth rate of the total added value of the whole economy; the industry and construction sector were up by 4.05 percent, contributing 63.80 percent; and the service sector rose by 1.22 percent, contributing 22.23 percent.

Although Vietnam’s GDP growth contracted in 2021, VNDirect believed that Vietnam’s economy would return to the "new normal" in 2022 and have brighter and more sustainable growth prospects thanks to high vaccination rates. Vietnam’s GDP is expected to grow by 7.5% yoy in 2022, with resilient growth in all aspects. Its macroeconomic fundamentals could be strengthened with a higher trade surplus, as well as a current account surplus and foreign reserves. These buffers could help Vietnam cope with internal and external risks, including higher-pressure inflation, a stronger dollar index and less favourable global financial market conditions. VNDirect’s forecast is based on the following key assumptions:

First, the global economy could maintain strong growth momentum in 2022. The International Monetary Fund (IMF) forecasted the global economy to expand by 4.9% yoy in 2022F (vs. an expected growth rate of 5.9% yoy in 2021F). It is noted that the global economic growth rate averaged around 2.8% per year in the period 2016-2019 (before the COVID-19 pandemic). A sustainable global growth outlook will boost strong external demand for Vietnam’s exports in 2022.

Second, 70-75% of Vietnam's population will be fully vaccinated against COVID-19 in the first quarter of 2022. This would help Vietnam successfully contain the pandemic.

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Third, international commercial flights could be resumed from 1Q22. That would support the recovery of the tourism industry in 2022, one of the two main drivers for a rebound in Vietnam’s services sector, along with strong domestic demand. According to VNDirect’s estimation, tourism contributed over 9.5% to Vietnam’s GDP in 2019 and created 2.9 million jobs, including 927 thousand direct jobs. However, the tourism industry has been hit hard by the COVID-19 pandemic in the 2020-2021 period. International visitors totaled 3.7 million (-80% year on year), while domestic visitors totaled 56 million (-34% year on year).The total revenue from visitors in 2020 was VND312tr (-59% year on year).In the first 9 months of 2021, total revenue from tourists continued to decline by 42% YoY to about VND137tr. For 2022, this stock company expects the tourism industry to recover strongly thanks to the resume of international commercial flights as well as a further easing of social-distancing measures. This will be the main growth driver for the recovery of Vietnam’s economy from 2022 onwards.

Fourth, the government is expected to issue new economic support packages and maintain an accommodative monetary policy until at least late-2Q22 to boost economic growth. VNDirect 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 favourable business environment after the pandemic.

In terms of sub-sectors, VNDirect anticipates 2.8% yoy growth in agriculture, forestry, and fishery, 8.6% yoy growth in industry and construction, and 8.1% yoy growth in services in 2022.