Vietnamese economy accelerates thanks to recovering manufacturing: Asia Perspective

Automobile manufacturing at Hyundai Thanh Cong factory (Photo: VNA)

According to the report, the country’s economic expansion in Q4 was mainly driven by the manufacturing sector which expanded 8.63% compared to the year before.

As the spread of COVID-19 was effectively controlled in Vietnam, and the Free Trade Agreement with the European Union came into effect, Vietnam’s manufacturing expanded by 5.82% in 2020 which led the way for the country’s economic growth. Overall, the industrial sector’s added value grew 4.8 % from the previous year, contributing to the country’s GDP growth of 2.91% in the year, it said.

According to Asia Perspective, merchandise export turnover in Q4 increased by 13.3% year on year and amounted to US$78.9 billion. Imports expanded by 15.7% year on year to US$76.4 billion. For the full year, exports grew 6.5% and imports gained 3.6% with a trade surplus of US$19.1 billion – the highest value recorded since 2016.

Vietnam’s Consumer Confidence Index reached 121 in Q4 2020, indicating a recovery from Q2 when the same number was 117, the lowest recorded since 2017. Effective containment measures ensured the upturn of domestic consumer services, as well as domestic travel and tourism. As a result, total domestic retails and consumer services in Q4 were approximately US$60.5 billion, increasing by 6.4% from Q3 2020 and 8.0% year on year, according to the report.

It pointed out that FDI in Vietnam grew by 1% year on year during Q4 2020. However, the total annual FDI declined by 2% from the year before. While the Republic of Korea (RoK), Hong Kong, and Singapore were the largest investors in 2019, China became Vietnam’s third-largest investor in 2020, joining Singapore and the RoK in the top 3. The manufacturing sector remained the most attractive for investors, accounting for 47.7% of the newly registered FDI in 2020.

Meanwhile, the Japan Research Institute held that factors helping Vietnam enhance its advantages and promote growth last year included the shift of production bases by companies and the signing of many positive free trade agreements. It underlined that export is the factor making the Vietnamese economy stable. In 2020, Vietnam posted 7% growth in export, higher than other ASEAN member countries.

According to JRI, in order to maintain stable growth in the medium and long term, Vietnam should strengthen human resources training in industrial sectors with high added values, which requires the country to reform its regulations and complete legal corridor on bankruptcy settlement, and create favourable mechanism in dealing with shareholders’ disputes.