Research Center

Economic figures in April suggest a bright picture for the economic acceleration in the second quarter when the growth of many economic activities returns to pre-pandemic levels. Export strengthens its upward momentum with impressive growths of electronics products thanks to the high external demand. Therefore, the domestic production recorded a growth rate at a near double-digit level with the impressive performance from the export-oriented industries group. Regarding the domestic demand, the growth rate of retail sales returned to the double-digit level, mainly reflecting more optimistic domestic consumers under the fading fear of COVID-19 and the re-opening to foreign visitors. On the downside, although CPI kept higher, speed has slowed and was under the government’s target of 4%.

In January 2022, long-holiday effects caused economic recovery to temporarily slow down from the impressive recovery since 4Q21. Export activity decelerated from a record high last month, especially in highly FDI-concentrated areas. The seasonality also impacted labor-intensive industries in the industrial sector, limiting its high-growth momentum in the previous period. However, those seasonal effects are only short-lived, and the economy is expected to return to a high-growth track in the upcoming months.

After a severe contraction in 3Q21, Vietnam's economy has successfully backed into the pre-pandemic growth track in the fourth quarter. It is visible that the main growth drivers for 4Q21 are from the manufacturing and export areas when these sectors have a phenomenal run in the reopening phase. Meanwhile, marked recovery in retail sales in the last two months also eases some pressure on the economic growth. These developments lay a strong foundation for the economic outlook in the next year.

Economic recovery continued gaining momentum in the second month of the reopening with robust growth in trade and industrial sectors taking a spotlight. Furthermore, a marked rebound in the retail sector also caught our eyes. On the other side, inflation was also signaling upward pressure from inflated energy prices, although it remained well-controlled.

Vietnam's economy witnessed an unprecedented contraction in 3Q21 under several-month hard lockdown. Services businesses are getting the hardest hit from the lockdown, while manufacturers are also facing partial disruption under COVID-containment requirements. However, better-than-expected macro developments in September shed light on sound recovery in the post-crisis.

Vietnam’s fast-growing economy is reversing towards contraction territory shortly after 2 months of Delta’s variant impact. A long period of growth in export and industrial sectors has abruptly ended in August, while the services sector is almost completely locked down with current mobility restrictions. Whether it is a temporary disruption or a potential recession depends on an answer of when the government brings the outbreak under control.

The current domestic economic outlook becomes gloomy when the government applies stricter measures to deal with the current outbreak. Domestic consumption retreated further under a short-term disruption in the services sector, and CPI became more volatile due to the temporary shortage of essential goods. Export demand is among a few drivers for economic growth in this quarter with our expectation of successful re-opening the economies from our major trading partners. The industrial sector is also in expansion territory thanks to strong growths in export demand-driven industries.