What is the outlook for Vietnam GDP growth next year?

Export is one of drivers for Vietnam economy in 2022. Photo: Hai Phong port

Expectation from 4Q GDP growth

Due to the 4th wave outbreak, Vietnam's GDP at the 2010 constant price in 3Q21 recorded a contraction as most economic activities stepped aside for transmissibility controls in numerous provinces. GSO reports that the real GDP witnessed a reduction of 6.17% YoY in this quarter, marking the historic occasion that the growth rate stepped into the red territory and deviating from the recovery path that was shaped in two first quarters this year.

The economic performance was much different from the government’s scenario in the Resolution No.1 stated at the beginning of this year. Vietnam Minister of Planning and Investment, in the meeting of the middle of September, provided the early signal of the economic slowdown when he reduced the government target to a lower range of 3.5%-4.0% from the initial value of 6.5%, indicating that the implicit economic growth for 2H21 probably reaches 1.95% YoY in the worst case and 2.80% YoY in the best case. In the late September, economic meeting held by the National Assembly with economists, a poor economic performance was also mentioned by numerous participants. However, the consensus contraction was between 2.0% and 3.0%, just a half of the actual result.

Given the severe contraction in the third quarter, an extremely high GDP growth rate in the last quarter is a must for Vietnam to meet expectations set by economic institutions and MPI’s plan. Kis Vietnam extracted the implied 4Q21 forecasts from expected annual numbers and show that real GDP in the last quarter has to grow by 9.13% YoY, 12.16% YoY, 11.85% YoY, 8.97% YoY, and 13.98% YoY to meet the expected value of ADB, World Bank, Standard Chartered, Vietnam MPI, and ICAEW, respectively.

Drivers for 2022 GDP growth

VNDirect projected Vietnam’s GDP to rise 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 in 2022. The International Monetary Fund (IMF) forecasted 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, this stock company 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. VNDirect expected that a high vaccination rate would help Vietnam successfully contain the pandemic. 

Third, international commercial flights that could be resumed from 1Q22, 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, the government could maintain loose monetary and fiscal policies until at least late-2Q22 to support economic growth. VNDirect also expected 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, this stock company 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.