The National Centre for Socio-Economic Information and Forecasting (NCIF) has released a forecast on Vietnam’s economic performance in 2021, with GDP growth of 6.72% and an average consumer price index (CPI) of 4.2% under an optimistic scenario.

In the best-case scenario, the global economy recovers faster than expectations and production becomes more stable in 2021, according to a joint report from the NCIF and the UN Development Programme in Vietnam.

Meanwhile, the domestic business environment is improved, business support policies help enterprises engage more deeply into global value chains, and new generation free trade agreements (FTAs) are implemented, along with the Government’s efforts in restructuring itself in terms of organisation, technology, and digitalization, promoting Vietnam’s economic growth.

Upturn expected in exports

According to Dang Duc Anh, Vice President of the NCIF, Vietnam’s success in controlling the COVID-19 pandemic and maintaining macro-economic stability are foundations for economic recovery.

During a difficult 2020, Vietnam posted strong economic performance despite the impact of the pandemic, he said.

Commenting on Vietnam’s economic outlook in 2021, NCIF experts said the recovery of partner economies will promote its exports.

The majority of international organisations believe the global economy and major world powers will post high growth this year, especially major trading partners of Vietnam such as the US, the EU, China, Japan, and the Republic of Korea.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), the Regional Comprehensive Economic Partnership (RCEP), and the EU-Vietnam Free Trade Agreement are among the positive factors supporting Vietnam in speeding up its economic recovery in 2021 and over the next five years.

Exports to the US and China may continue to be maintained amid reduced US-China trade tensions. With optimistic signs in both major economies, Vietnam’s exports may rise sharply, Anh said, adding that exports to the US could face risks as the US has labelled Vietnam a currency manipulator.

Driving role of domestic economy

According to the report, Vietnam is showing its considerable attractiveness to international investors thanks to the economy’s strong resilience and high post-pandemic recovery outlook as well as opportunities from FTAs.

The country is also forecast to benefit from the transition of supply chains to lower-cost countries. Though FDI fell about 15% last year in volume, capital disbursement was down just 2%.

The report highlighted that the domestic economy, domestic consumption, and public investment will be bright spots this year and play important roles in economic recovery.

Domestic consumption is currently contributing 68-70% to GDP and this is predicted to continue to rise as incomes improve.

Public investment, meanwhile, is likely to continue to be boosted thanks to the launch of major projects in 2020 and recoveries in production and business activities.

However, the NCIF report also underlined the risk from the global economy due to the complicated nature of COVID-19.

International experts pointed out that many countries are experiencing periodic crises and structural crises resulting from the pandemic, which may take them two to four years to fully overcome.

The NCIF therefore held that it will not be easy for Vietnam this year due to the impact of digitalization, protectionism, and loose connections between FDI firms and domestic small and medium-sized enterprises.

According to NCIF Deputy Director Dr Dang Duc Anh, the baseline scenario forecasts the economy to grow at about 6.17% and CPI to stand at 3.8% if the global economy rebounds and COVID-19 is gradually brought under control.

In the best-case scenario, GDP growth will reach 6.72% and CPI around 4.2% if the global economy recovers at a faster pace than expected.