Research Center

The unemployment rate and non-farm payrolls are commonly used indicators by governments and analysts to measure economic health. The interaction term between the federal funds rate and business confidence has a negative relationship with the unemployment rate, indicating that a decrease in business confidence and the federal funds rate would actually produce an increase in the unemployment rate. Therefore, FED is watching these indicators closely to appropriately adjust their policy.

The economic growth continued to strengthen at a broad base in 1Q22 thanks to strong performance in key export sectors and export-oriented manufacturing industries. Furthermore, the services sector also started picking up in the early full-reopening of services activities, while the FDI sector was significantly benefiting from the normalization. Another spotlight is that inflation remained well-controlled in 1Q22 even under surging global commodities prices. These developments build a strong foundation for a resilient recovery in 2022.

Vietnam's economy continues to be on a growth track during the reopening progress with trade and manufacturing sectors remaining the main growth drivers. What worries us for now is the uneven economic recovery as domestic consumption is in weakness after months since the reopening, which is less than our expectation.

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.

The impressive rebound of Vietnam’s economy in 4Q21 creates momentum for further economic recovery in 2022. We expect the following sectors to be key growth pillars for the economy: (1) robust and stable industrial growth thanks to secured production activity and increased export demand; (2) pent-up demand in domestic spending in the reopening phase; (3) strong recovery in capital investment, primarily driven by investment demand from government and FDI. Last but not least, the upcoming fiscal - monetary support program will further push the economy back to the high-growth track in 2022.

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.

October macro figures well illustrate that the economic recovery has been more resilient than our expectation in the early reopening. From the supply side, the industrial sector has been through a resilient recovery to surpass a pre-pandemic level. On the demand side, retail sales also rebounded remarkably shortly after easing social-distancing rules, while export demand remained sound and stable. From our view, this is just a start of the successful economic recovery in the fourth quarter.

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.