Vietnam shines amid global economic volatilities

Goods are transported for export at Hai Phong International Port. (Photo: VNA)

Despite global volatilities, Vietnam’s economy has rebounded strongly this year beyond the forecasts of many international organisations, making the country one of the rare bright spots in the global gloomy picture and has the potential to become a new ‘tiger’ in Asia.

The latest report from the General Statistics Office (GSO) showed Vietnam's GDP growth rate in the first nine months of 2022 hit a 12-year high to reach 8.83%. Notably, the economy expanded 13.76% in Q3 2022 compared to 7.72% and 5.05% in Q2 and Q1 2022, respectively. The 13.7% GDP expansion in Q3 2022 was a record quarterly growth rate in Vietnam and surpassed the rate of 13.5% of India to become the highest in Asia this year.

The World Bank attributed Vietnam’s rebound to a recovery of exports and the release of pent-up demand following the removal of COVID-19-related mobility restrictions and, more recently, the gradual return of foreign tourists.

Vietnam’s economic growth was reported in all three key sectors, of which services increased by 10.57%, industry-construction up 9.63%, and agriculture-forestry-fishery up 2.99%.

The country’s import-export turnover during the period increased by 15.1% to 558.5 billion USD with a trade surplus of 6.52 billion USD while total retail sales of consumer goods and services surged by 21%.

Besides, the business situation has been continually improving, with the number of newly established enterprises surging by 38.6% to more than 163,000.

Disbursement of foreign direct investment (FDI) in the first nine months of this year also surged 16.2% year-on-year to 15.4 billion USD, marking a five-year record high, the Ministry of Planning and Investment's Foreign Investment Agency (FIA) reported.

These positive figures showed foreign-invested enterprises have been constantly recovering and expanding their production and business activities in Vietnam, which has reflected business confidence in the country’s success in maintaining macroeconomic stability, FIA said in its September report.

According to Prime Minister Pham Minh Chinh, the economy has recovered very positively, with many cities and provinces nationwide reporting impressive Gross Regional Domestic Product (GRDP) growth in the first three quarters, including Ho Chi Minh City with 9.97%, Hanoi with 9.69%, Bac Ninh with 9.7%, Hai Duong with 10.14%, Quang Ninh with 10.12%, Hai Phong with 12.06%, Can Tho with 17.57%, Da Nang with 16.76%, Khanh Hoa with 20.48% and Bac Giang with 23.98%.

Notably, Minister of Planning and Investment Nguyen Chi Dung said the country’s high economic growth has been accompanied by stabilising the macro-economy, successfully controlling inflation, ensuring major balances of the economy and improving people's living standards.

The GSO reported the country’s average consumer price index in the first nine months was only 2.73% while State budget revenue and total investment capital of the whole society surged by 22% and 12.5% over the same period in 2021, respectively.

Many international organisations have been so far surprised by the very high growth rate of above 13% of Vietnam in the third quarter of this year. The impressive surge has resulted in their upgrade of the country’s economic growth forecast, of which Moody’s, Fitch Ratings, World Bank (WB) and International Monetary Fund (IMF) predict Vietnam's GDP growth in 2022 at 8.5%, 7.9%, 7.2% and 7%, respectively

The upgrade is very notable when the organisations have lowered their 2022 global economic growth outlook. For example, in last month’s report, while having raised its GDP growth forecast for Vietnam this year to 7.5% from 5.3% in April, the World Bank projected the overall rate of the East Asia and Pacific region to slow to 3.2% this year from 7.2% in 2021.

Moody's Investors Service last month also upgraded the Vietnamese Government's long-term issuer and senior unsecured ratings to Ba2 from Ba3. Vietnam is the only country in the Asia-Pacific region and one of four countries in the world that have had their credit rating upgraded by Moody's since the beginning of the year.

Moody’s noted in the report: “The upgrade to Ba2 reflects Vietnam's growing economic strengths relative to peers and greater resilience to external macroeconomic shocks that are indicative of improved policy effectiveness, and which Moody's expects to continue as the economy benefits from supply chain reconfiguration, export persification and continued inbound investment in manufacturing.

“The rating also reflects a sounder fiscal footing backed by contained borrowing costs, a conservative approach to fiscal policy and improved government liquidity, driven by the ongoing transition from external concessional borrowing toward longer-dated, low-cost domestic market financing.”

According to Tran Van Son, Minister – Chairman of the Government Office, international organisations have positive assessments of Vietnam's socio-economic situation. They forecast the country's economic growth rates in 2022 and 2023 will be among the highest in Southeast Asia.

Economist Brian Lee Shun Rong at Malaysia's largest financial services group Maybank believed as a rising star in the global supply chain, Vietnam has the potential to become a new ‘tiger’ in Asia after the Republic of Korea (RoK), Singapore, and China's Taiwan and Hong Kong.

Exceeding targets

The strong GDP recovery in the first nine months of the year, especially in Q3, has created a prerequisite for Vietnam’s vigorous growth in 2022 and the country is so far estimated to meet nearly all 15 targets set for this year. According to the National Assembly's (NA) Committee for Economic Affairs, 15 social-economic development targets, except the social labour productivity growth rate, are expected to be met or exceeded this year.

Right after the nine-month socio-economic statistics were published, the Ministry of Planning and Investment also decided to adjust up the 2022 economic growth scenario. Accordingly, the ministry proposes to strive for a full-year growth of 8%, about 1.5-2 percentage points higher than the 6-6.5% target assigned by the National Assembly and set by the Government.

According to experts, production and service activities in Vietnam have returned to normal and the country will continually benefit from the global supply chain shift, which will contribute to strongly boosting up the country’s exports.

However, in the context that the world economy will continue to face many difficulties in the last months of the year and the demand for imported goods from countries that are the main trading partners of Vietnam such as the US and the EU will decrease, members of the NA’s Committee for Economic Affairs said it is necessary to have policies to support credit for exports in the remaining months of the year and in 2023.

Besides, Minister of Planning and Investment Nguyen Chi Dung noted the country needs to promote the disbursement of public investment capital to achieve a high growth rate in the rest months of the year.

According to the Ministry of Finance, the total public investment capital will be some 24.3 billion USD in 2022, about 4.2 billion USD higher than in 2021. By the end of September, the disbursement of public investment increased to more than 10.6 billion USD, but the new rate reached merely 46.7% of the plan assigned by the Prime Minister, 0.7% lower than in the same period 2021.

Besides, Dung said, to promote economic growth in Q4, it is also necessary to better implement the Government’s socio-economic development and recovery programme, which includes a 40 trillion VND interest subsidy package for pandemic-affected customers, as the capital disbursement of the package remains limited.

Higher economic growth rates in Q4 and the whole of 2022 will be a driver for the country next year when many potential risks emerge, Dung said./.