Viet Nam’s economic growth is expected to rebound to 6.7% this year despite the recent resurgence of the coronavirus disease (COVID-19) pandemic in nearby countries and rise to 7.0% in 2022, according to a new report from the Asian Development Bank (ADB).

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The Asian Development Outlook (ADO) 2021 says Viet Nam’s economic growth will be boosted by export-oriented manufacturing, increased investment, and expanding trade. The growth momentum is expected to continue, thanks to ongoing reforms to improve the business environment and Viet Nam’s participation in multiple free trade agreements involving almost all advanced economies. Rising international oil prices and increased domestic consumption is expected to push inflation up to 3.8% this year and 4.0% in 2022.

“Stagnant domestic consumption and weak external demand caused by the COVID-19 pandemic slowed down Viet Nam’s economy last year, but the growth momentum remains strong this year and next, made possible by Viet Nam’s success in controlling the spread of the virus,” said ADB Country Director for Viet Nam Andrew Jeffries. “But significant risks remain this year and next, including the emergence of new coronavirus variants and a delay in the government’s vaccination plan.”

Faster-than-expected recovery in the People’s Republic of China and the United States would significantly expand Viet Nam’s trade and growth prospects, the report says. The uneven global COVID-19 vaccine rollout, however, could delay Viet Nam’s return to its strong pre-pandemic growth path, given the country’s reliance on external trade. A quick revival of domestic private investment may worsen the risk of asset bubbles, if credit is not channeled to productive sectors.

The report says Viet Nam can maintain inclusive growth by softening the pandemic’s impact on poverty and incomes. It urged the government to adopt a long-term sustainable strategy to help the poor and vulnerable diversify their livelihoods through measures such as vocational training and improved access to microfinance for new businesses.