Against all previous forecasts that the Vietnamese economy would grow at a maximum rate of about 7 per cent for Q3, the economy has strongly bounced back thanks to its resilience against tough global events.

The General Statistics Office has reported that after growing 5.03 per cent in Q1 2022, the Vietnamese economy bounced back to 7.72 per cent in Q2, and an impressive 13.67 per cent in Q3.

In the first nine months of the year, it grew 8.83 per cent against the 1.42 per cent in the same period last year, and only 2.12 per cent in that of 2020 – representing the biggest 9-month increase in terms of rate within 11 years.

These achievements have been hailed for more than a week, both at home and abroad, demonstrating the government’s efforts to drive the economy forward, and businesses’ strong determination to weather difficulties to recover themselves and continue development.

“Vietnam’s GDP growth in 2022 and 2023 will be among the highest in Southeast Asia as shown in many international organisations’ forecasts and assessments on the Vietnamese economic outlook,” stressed Tran Van Son, Minister and Chairman of the Government Office.

“Moody’s, the World Bank, the International Monetary Fund, and the Asian Development Bank (ADB) have projected Vietnam will achieve a GDP growth of 8.5, 7.2, 7, and 6.5 per cent, respectively, this year.”

New forecasts

In the eyes of the World Bank, “Vietnam has been a development success story”. Economic reforms over the decades, coupled with beneficial global trends, have helped propel Vietnam from being one of the world’s poorest nations to a middle-income economy in one generation. Between 2002 and 2021, GDP per capita increased 3.6 times, reaching almost $3,700. Poverty rates ($1.90 a day) declined sharply from over 32 per cent in 2011 to below 2 per cent.

“Thanks to its solid foundations, the economy has proven resilient through different crises, the latest being COVID-19. Vietnam was one of only a few countries to post GDP growth in 2020 when the pandemic hit,” the World Bank noted about Vietnam on its website.

According to the World Bank, Vietnam’s GDP growth slowed down to 2.58 per cent in 2021 due to the emergence of the Delta variant but is expected to rebound to 7.2 per cent in 2022 and 6.7 per cent next year – the highest rates in the East Asia and Pacific region - far higher than its April prediction of only 5.3 per cent for 2022. This is ascribed to domestic production bouncing back.

Andrea Coppola, lead economist and programme leader for Vietnam, said the country’s on-year economic growth in Q3 of 13.67 per cent is a positive signal for further growth in the coming time.

“This performance is in line with the projections released by the World Bank in the latest regional economic update, and confirms that Vietnam may be the fastest growing economy in East Asia and Pacific with 2022 GDP growth estimated at 7.2 per cent,” Coppola said. “If we compare GDP during the first nine months of 2022 with the same period in 2021, we observe an 8.83 per cent growth which is the fastest growth registered during the last decade.”

Coppola explained that there are two main drivers behind this performance. “Firstly, it is the rebound of the manufacturing and services sector due to a release of pent-up demand following the removal of pandemic-related restrictions. Secondly, it is a low base effect given the large difference between the contraction experienced during the third quarter of 2021 and the positive performance during the third quarter of 2022.”

The ADB has also kept its favourable economic outlook for Vietnam as it projected GDP to increase 6.5 per cent this year and 6.7 per cent in 2023.

“Vietnam’s economy recovered faster than expected in the first half of 2022 and continues to grow amid the challenging global environment,” said ADB country director for Vietnam Andrew Jeffries. “The steady recovery was supported by strong economic fundamentals and driven by a faster-than-expected bounce back of manufacturing and services.”

Global analysts Trading Economics last week forecasted that the GDP annual growth rate in Vietnam is expected to be 7.2 per cent by the end of this quarter.

“Considering the first three quarters of the year, the GDP expanded 8.83 per cent on-year, which was the highest increase of nine months in the 2011-2022 period, as production and business activities gradually regained growth momentum, policies recovered, and the government’s socio-economic development has brought into full play,” Trading Economics explained.

Updated scenarios

Vietnam’s Ministry of Planning and Investment (MPI) last week offered two growth scenarios for this year, fuelled by high growth in Q3 and the country’s efforts to control the pandemic with it ranked second in Asia Nikkei’s latest COVID-19 Recovery Index.

“In the low scenario, the economy for Q4 will face big difficulties, and this will lead the economy to a growth rate of 7.5 per cent for 2022,” said MPI Deputy Minister Tran Quoc Phuong. “However, in the high scenario, if Q4 sees more favourable conditions, the economy will climb about 8 per cent for 2022. And we are expecting this scenario will come true.”

The National Assembly earlier set a target of about 6.5 per cent for 2022. However, the government now expects that the rate will be about 7 per cent for the whole year. The MPI also noted that it will be difficult to make forecasts for next year as “there will be more disadvantages than advantages”.

“The world is now and will likely be faced with major inflation pressure in 2023. Global high inflation, especially high inflation in big economies that are Vietnam’s trade partners, will be difficult to end in the short term and it will surely linger into 2023,” Phuong explained. “According to expert analysis, many economies are implementing policies to rein in inflation, and this may cause an economic depression. And it would take a very long time to overcome this situation to bounce back.”

An additional disadvantage for Vietnam’s economic growth in the coming time is the Russia-Ukraine conflict showing no signal of ending. “This conflict has and will continue causing shortages of energy, which will have negative impacts on the global economic growth including Vietnam’s,” Phuong said. “Experiences show that since the conflict took place, we have been finding it hard to monitor fuel prices and inflation. Thus the MPI sees that this is a very disadvantageous factor in 2023 for Vietnam’s economy.”

At the sixth plenum of the 13th Party Central Committee opened last Monday, Party General Secretary Nguyen Phu Trong called for efforts to maintain macroeconomic foundations and stimulate growth to prepare for all probable scenarios, especially moving into 2023.

“Pressure in inflation, interest rate, exchange rate, and the risk of depression of the global economy remains the biggest challenge for us to ensure macroeconomic stability, control inflation, and ensure big balances of our economy,” the Party leader stressed. “Production and business activities, despite some recovery, remain in difficulties caused largely by strong fluctuations in prices of fuel and input materials, high increases in production costs, and a reduction in export-import markets.”

Trading Economics warned that due to such risks, in the long-term, Vietnam’s GDP is projected to trend around 5 per cent in 2023 and 6.10 per cent in 2024.

The ADB also underlined new challenges for Vietnam.

“Risks to Vietnam’s economic outlook remain elevated. The global economic slowdown could weigh more heavily on exports than forecast, which would worsen the current account balance. Although aggressive interest hikes by the central banks of major economies have helped dampen global price pressures, an intensification of global geopolitical uncertainties could push up commodity prices, worsening inflation in Vietnam,” said an ADB report on Vietnam’s economic outlook for 2022.