Rosy international outlook forecast for Vietnam’s economy

Rosy international outlook forecast for Vietnam’s economy

Despite the fourth outbreak of Covid-19, Vietnam’s growth prospects are still optimistic and the economy is forecast to recover to the pre-Covid-19 level in the second half of 2021.

Growth continues

Recently, S&P Global Ratings (S&P) announced it would keep Vietnam’s national credit rating unchanged and raised its outlook from stable to positive.

International organizations expect Vietnam’s economy will continue to grow in 2021

Vietnam is the only country in the world whose outlook has been raised to positive by all three major credit agencies - Moody’s, S&P, and Fitch Ratings. In 2020, the outlook for over 120 countries was downgraded. As of May 21, 2021, 16 countries have been downgraded worldwide by Moody’s, S&P, and Fitch Ratings.

S&P expects real gross domestic product (GDP) growth to rebound to 8.5 percent in 2021 before settling closer to Vietnam’s long-term trend rate of growth from 2022 onward. In October last year, S&P expected Vietnam’s GDP growth in 2021 to reach 11.2 percent but lowered the expectation to 8.5 percent on May 21 following the outbreak of the fourth wave of Covid-19.

Vietnam’s attractiveness as a premier destination for foreign investment in Southeast Asia, along with its young, increasingly educated, and competitive workforce, should help keep the country’s long-term development trajectory intact.

Standard Chartered Bank forecasts that Vietnam’s GDP growth will accelerate to 6.7 percent in 2021 (the bank forecast a 7.8 percent growth before the new outbreak of the pandemic) and 7.3 percent in 2022. “Vietnam’s economic fundamentals remain robust. The country has been one of the world’s best-performing economies during the pandemic; that said, we are closely watching the domestic Covid-19 situation,” said Tim Leelahaphan, economist for Thailand and Vietnam, Standard Chartered, in the bank’s recent Global Research report entitled “Vietnam - Strong performance continues this year”.

A representative of Fitch Ratings said that despite the pandemic, Vietnam will still maintain a positive outlook. It forecast GDP growth of about seven percent in 2021 and 2022, in line with a broader global economic recovery sustaining export growth and a gradual normalization of domestic economic activity based on its expectation of continued success containing domestic coronavirus infections.

According to the latest economic outlook report from Oxford Economics (OE), commissioned by the Institute of Chartered Accountants in England and Wales (ICAEW), despite the recent resurgence in Covid-19, Vietnam’s growth outlook remains optimistic and the economy is expected to return to pre-pandemic levels by the second half of 2021. The country’s GDP is forecast to grow 7.6 percent in 2021, among the highest rates in the region. Vietnam was one of the few economies in the world to grow in 2020 due to its success in containing the pandemic, the report said.

“This early success enabled the economy to benefit from the surge in global trade activity and enjoy strong foreign direct investment flows that boosted export-oriented and manufacturing industries,” according to the report.

Vaccination key to growth

Vaccination progress will remain an important barometer for growth in the second half of 2021 in Southeast Asia including Vietnam, experts have said. Asian Development Bank (ADB) Country Director for Vietnam Andrew Jeffries pointed out that risks appeared when the pandemic resurged in April while the implementation of the Covid-19 vaccination plan was delayed.

In order to bring life back to normal, Vietnam has set a target of reaching herd immunity with 70 percent of the population vaccinated, and maintaining that annually. At the recent launching ceremony of the National Covid-19 Vaccine Fund, Prime Minister Pham Minh Chinh emphasized that vaccination is the essential, long-term, strategic solution for the country to overcome the pandemic.

Tran Thi Hong Minh, Director of the Central Institute for Economic Management (CIEM), said that if the fourth wave of the pandemic can be controlled soon and vaccinations are accelerated for workers, a higher economic growth than 2020 can be achieved. The lessons of 2020 show that accelerating public investment disbursement while ensuring efficiency is particularly crucial, Minh said.

VietNam Economic News