Research Center

Modest economic growth in 1Q21 put pressure on the target economic growth for full-year 2021. However, there are still some factors bolstering the economy in the next quarter, including COVID-19-devastated low base output in the same period last year, ongoing economic recovery, and promising fiscal spending from the newly-formed government. Also, accelerating vaccination and fiscal reliefs on a global scale add more favors for export activity and export-driven manufacturing in the next quarter.

GSO’s figures show that Vietnam’s real gross domestic product (GDP) sustained its modest growth rate at 4.48%, leaning back on the impressive improvement in taxes-less-subsidies (TLS) and industry and construction (I&C) items. We believe that the Decree 41 tax deferral policy drove the TLS’s to grow notably this period.

February showed a gloomy picture for the economic activity due to a long holiday. Export and production posted the first reduction since the pandemic, while CPI recorded the strongest increase in 8 years. For the outlook in March, we expect the well-controlled pandemic situation domestically and accelerating COVID-19 vaccines distribution globally will push economic growth back to expansionary.

Vietnam's economic conditions in the first month of 2021 remain favorable as trade activities and retail sales continued high growth. Looking ahead to February, the domestic economic activity may be weakening due to the new outbreak, and the negative impact will be largely dependent on how the government controls the pandemic.

With 4Q20 strong growth, 2021 outlook for Vietnam’s economy becomes even brighter. Supporting the export and FDI inflows, the COVID-19 vaccine distribution help normalize the global economic recovery. Additionally, massive fiscal packages continued a priority for governments to boost economic growth. Vietnam's government is also utilizing this tool to help nurture businesses for the longer-term. Last but not least, massive FTAs, including EVFTA and RCEP, would be an important factor to lift up Vietnam’s economy in 2021. For all those reasons, we predict the economic growth to reach 6.36% YoY in 2021.

November data showed that a worsening COVID-19 situation in the U.S. and Europe has again put downward pressure on export activity. For the domestic market, demand has remained strong with retail sales and import accelerating. However, the recent community-infection concerns us about the economic outlook in the near term. Hence, we predict that the economy will deviate from the acceleration rail to the extent that reversely related to how effectively the government controls the new COVID wave.