Two other factors also help Vietnam to thrive in 2022: the digital economy and the economic recovery program next year. In the photo: Production activities at Earth Corporation Vietnam Co., Ltd. Photo: Pham Ngon

Particularly, the agricultural sector is expected to maintain growth at the rate of 2020-2021, making a small but steady contribution to growth in 2022.

GDP forecast to reach 5.5%

Speaking at the Vietnam Economic Scenario Forum 2022 with the theme: Recovery & Acceleration of Growth - From economic stimulus policies to the resilience of industries, localities and businesses held on January 14, Deputy Head of the Central Economic Commission Nguyen Hong Son said that 2022 is a year of great significance because we not only have to overcome short-term difficulties and challenges but also create a foundation for the development of the economy - society in the medium and long term.

As published in the latest report on January 13, the World Bank (WB) assessed that Vietnam's economic recovery process in 2022 will fire on all cylinders with the support of a looser fiscal policy at least in the first half of 2022. With the assumption that the Covid-19 pandemic is relatively well-controlled domestically and globally, Vietnam's GDP this year is forecast to grow by 5.5% by the World Bank, lower than the target of 6.5-7% set by the government, as well as the expected figure of other organizations such as HSBC (6.5%) and Standard Chartered (6.7%).

According to the World Bank, Vietnam's service sector will gradually bounce back as consumers and investors regain confidence, while the manufacturing and processing industries will benefit from stable demand from the US, EU and China. The agricultural sector is expected to continue to grow at the rate of 2020-2021, making a small but steady contribution to growth.

Commenting on the main factors that will boost Vietnam's economy in 2022, Ms. Dorsati Madani, a senior economist at the World Bank, evaluated that in recent years, especially 2020, those related to the manufacturing and processing sector witnessed a remarkable recovery due to more spending demands and gradually domestic investors recovery which creates stable momentum for development. As a result, along with key rehabilitation programs, the Government needs to come up with better welfare programs.

In order to reach its 6.5% growth target in 2022, Ms. Dorsati believes that domestic demand is strong enough. However, there are still many risks due to the unclear evolution of the pandemic. The outbreak of new variants could lead to the re-imposition of social distancing measures, affecting economic activities. Weaker-than-expected domestic demand could affect Vietnam's recovery.

Two factors enable Vietnam to recover

Analyzing Vietnam's economic prospects in 2022, Nguyen Minh Cuong, chief economist of the Asian Development Bank (ADB), said that disease control and vaccine coverage are still decisive factors for economic recovery. "With vaccine coverage increasing and infections falling, Asian countries have begun to reopen their economies which are sealed by the dynamics of economic activities. Similar to the region, Vietnam's vaccination rate is very fast. Up to now, 100% of people over 18 years old have received at least 1 dose belonging to the leading group in the world," said Mr. Cuong.

According to Mr. Nguyen Minh Cuong, there are two factors that will also help Vietnam thrive in 2022: the digital economy and the upcoming year's economic recovery program. Besides growth opportunities, Mr. Nguyen Minh Cuong also noted a series of risks that must be considered.

Firstly, despite rapid vaccine coverage, the way to deal with Covid-19 still needs to continue to be improved. The government needs to strengthen coordination among localities, implement policies, strengthen the capacity of health care, treatment, and supplement drug treatment support (manufacturing and importing).

Second, inflation and credit must be strictly controlled. The risk of macro instability may arise from the financial system due to rising bad debts, asset bubbles (land, bonds, stock market). Recent manifestations have revealed the "specific Vietnamese" risks to be aware of. In the long term, shifting the management of the economy based on ownership to controlling abuses of market power as seen in recent market intervention behavior.

Third, it is a fact that disbursement packages from public investment to support packages are very slow. Disbursement of the economic recovery program will be more complicated with lots of items and sources of capital, different mechanisms as well as policy measures (fiscal, monetary combination for interest rate subsidy package, etc.). On the other hand, there is no clear distinction between public investment in the framework of the economic recovery plan and public investment in the approved ones. Therefore, the timely implementation and disbursement of the economic recovery program is paramount in 2022 - 2023.