Viet Nam’s economic growth is expected to slow down due to a resurgence of the coronavirus pandemic (COVID-19) that has tightened the labor market, lowered industrial output, and disrupted agricultural value chains, according to the Asian Development Bank (ADB).

Source: ADB

The country’s economy is expected to grow 3.8% this year and 6.5% in 2022, according to the Asian Development Outlook (ADO) 2021 Update. Growth picked up in the first half of 2021, largely because of higher trade volumes, but slowed down in the second half of the year as the fourth wave of the pandemic took a toll on business and the labor market. Inflation will be muted in 2021 and 2022 due to the slower growth.

“The prolonged COVID-19 pandemic and extended lockdowns have weakened consumption and investment, hampering Viet Nam’s growth prospects," said ADB’s Country Director for Viet Nam Andrew Jeffries. “But the Vietnamese economy will bounce back if the COVID-19 pandemic is brought under control by the end of 2021 and 70% of the country’s population are vaccinated by the second quarter of 2022.”

ADB remains bullish on the country’s prospects in the medium and long term. Growth could be aided by a revival of domestic demand, an acceleration in the disbursement of public investment, and an expansion to new export markets thanks to multiple free trade agreements and the expected global economic recovery.

The near-term outlook remains challenging. The main risk is the prolonged pandemic, especially if the country’s vaccination rate does not increase significantly. Growth also depends on the government’s timely delivery of necessities, such as food and cash, to vulnerable groups affected by the pandemic.

Viet Nam can benefit from removing administrative hurdles to business and people, and accelerating digital transformation, which will help improve the efficiency of pandemic containment measures and support a sustainable economic recovery this year and next.