Research Center

The economy continued to gain upward momentum in October thanks to domestic-driven factors. Briefly, trade, IIP, and retail sales continued growing robustly in a stable inflation environment. Looking forward, the 2nd lockdown in large European economies, the 3rd largest trade partner, will once again put great uncertainty on the economic growth, but this time we believe the economy knows how to live with it. Besides, domestic consumption-driven sectors are and would be in good shape in 4Q20.

Economic recovery continues gaining pace by 3Q20’s end. The latest data showed 3Q20’s GDP growth rebounding markedly to 2.63% YoY from its historic low of just 0.36% YoY in 2Q20. Both export and import were accelerating at a double-digit pace, while the industrial sector continued to grow robustly. Also, FDI disbursement recorded the highest level in 2020. All these things are signaling a further economic recovery in 4Q20.

Data in August showed that the economy continued to recover further but at a more modest pace. Overall, export-import and industrial sectors saw further improvements, while the exchange rate and inflation remained highly stable. On the other hand, the disruption in FDI inflows put high pressure on the Government about how and when to open the sky. We assume a business-as-is scenario and expect the further improvement of the economy in September.

We saw that economic recovery was losing its momentum in July 2020 in some aspects. Trade activity slowed down as our most import trading market as the U.S faced tough in controlling the pandemic. Other indicators, including CPI, IIP, FDI, also decelerated to some extent. We argue that the virus containment in the U.S will take time, and the Da Nang outbreak will likely hurt our production. Hence, we predict economic indicators to decrease modestly in August 2020.

Under tremendous hardship, the Vietnam economy saw a recession-like slowdown in 2Q20. But, at least there is a light to the end of the tunnel as the latest update of most macroeconomic indicators bring hopes in 3Q20 economic outlook. “The strong will get stronger” as we expect solid-growth sectors will be key factors pushing up the economy in 3Q20.

May’s data recorded a recovery in some macroeconomic indicators as both CPI and IIP bounced back markedly after hitting their lowest levels in April. On the opposite, related-external factors, such as FDI and trade, were yet to improve as data in those areas continued to decline further. However, some new positive signs are emerging lately as data for PMI and the consumer confidence indices from some advanced economies, such as the U.S., Japan, and South Korea, are losing downward momentum. From our perspective, the timing for Vietnam's economy to pick up again will depend on the post-crisis recovery in the economies of our major partners, likely in the next couple of months.