All major mobility indicators in Vietnam rose sharply ahead of the Tet celebration as vaccination coverage surpassed 73 percent of the population, according to the World Bank (WB).

The bank said in its Vietnam Macro Monitoring in February that industrial production continued to grow, though at a slower pace and with mixed performance across sub-sectors while retail sales posted the first positive year-over-year growth rate since the COVID-19 outbreak starting in late April 2021.

Retail sales in January grew by 6.7 percent month-on-month and 1.3 percent year-on-year.

This recovery was fueled by strengthening consumer demand, particularly for goods as households prepared for Tet celebration. Indeed, sales of retail sales grew by 7.0 percent month-on-month and 4.3 percent year-on-year. Sales of services also increased by 5.2 percent month-on-month but was still 2.2 percent lower than a year ago.

Merchandise trade posted a surplus of 1.4 billion USD despite a slowdown in exports growth. Merchandise exports growth moderated to 8.1 percent year-on-year in January 2022 from 25.1 percent year-on-year in December 2021 while imports growth remained strong at 11.3 percent year-on-year.

This export deceleration reflected a sharp drop in exports of phones (down 26.1 percent year-on-year) and significant slowdown in other major exports, particularly computers, electronics, and machinery.

On the other hand, growth of textiles and garment exports remained strong, accelerating from 27.7 percent year-on-year in December 2021 to 34.4 percent year-on-year largely thanks to strong demand from the US.

By trading partners, exports to the US remained robust, expanding by 19.4 percent year-on-year while exports to China dropped by 15.2 percent year-on-year, reflecting the decline in exports of phones and computers to this market.

Vietnam attracted 2.1 billion USD of FDI commitment in January, up 4.2 percent year-on-year. Growth was driven by large investment in expansion of existing businesses, particularly in electronics and by active M&A activities. The latter doubled in value in January 2022 compared to a year ago, reaching over 400 million USD (or 20 percent of total FDI commitment).

Manufacturing continued to make up nearly 60 percent of total commitment, followed by real estates (22.5 percent). The disbursement of approved FDI projects continued to recover from their slump in the third quarter of 2021, increasing by 6.8 percent year-on-year in January 2022.

The Consumer Price Index (CPI) rose by 1.9 percent year-on-year, comparable to the rates recorded at the end of 2021.

Credit growth accelerated to meet credit demand ahead of the Tet holiday, the bank said.

According to the bank, under the new Economic Recovery Support Programme for 2022-23 was launched in January 2022, overall planned on-budget fiscal measures are an estimated 4.5 percent of revised GDP. The VAT rate has been cut from 10 percent to 8 percent for most sub-sectors.

WB experts recommended that the programme should be enhanced through adding further social protection measures to support workers and households affected by the pandemic. Additionally, close monitoring of the programme implementation would help ensure its intended impact is achieved.

Vigilance on the financial sector is also warranted, given the potential impact of the crisis on the quality of bank portfolio and the spillover effects of the expected increases in interest rates by the US./.