Vietnam Economy Extends Steady Recovery and Growth

11:30:37 AM | 2/4/2021

Many economies of East Asia and the Pacific (EAP) began to bounce back after severe economic shock in 2020. However, only China and Vietnam have followed a V-shaped recovery path with an output surpassing pre-COVID-19 levels in 2020. Most of the other countries have not seen a full-fledged recovery in terms of either output or growth momentum.

According to East Asia and Pacific Economic Update released by the World Bank (WB), growth in the region is expected to accelerate from an estimated 1.2% in 2020 to 7.5% in 2021. But they are likely to see a three-speed recovery. Vietnam is expected to grow even more strongly in 2021, by 6.6%, up from 2.9% in 2020.

Other large economies, more scarred by the crisis, will grow about 4.6% on average, slightly slower than pre-crisis growth. Recovery is expected to be particularly protracted in tourism-dependent island economies.

According to the report, economic performance has depended on the effectiveness of virus containment, the ability to take advantage of the revival of international trade, and the capacity of governments to provide fiscal and monetary support.

According to the General Statistics Office (GSO), the gross domestic product (GDP) in the first quarter of 2021 was estimated to expand by 4.48% from a year ago, up from 3.68% in the first quarter of 2020.

The agriculture, forestry and fishery sector rose by 3.16%, contributing 8.34% to the general growth rate. The industrial and construction sector expanded by 6.3%, contributing 55.96%; and the service sector climbed by 3.34%, contributing 35.70%.

Particularly, the agricultural sector grew by 3.19%, only lower than that in the first quarter of 2011 and 2018 in the 2011-2021 period, thus adding 0.29 percentage points to the GDP growth. The forestry sector increased by 3.78% but made up for just 0.02 percentage points. The fishery sector added 2.90%, higher than the growth of 2.79% in the same period of last year, contributing 0.07 percentage points.

In the industrial and construction sector, industry advanced 6.5% year on year in the first quarter, higher than the growth of 5.1% a year earlier but much lower than 10.45% and 9% in the same period of 2018 and 2019, respectively, contributing 2.2 percentage points to the GDP growth.

The processing and manufacturing sector continued to play a leading role in economic growth, jumping 9.45% to add 2.37 percentage points to the GDP expansion.

However, entering the second quarter, Vietnam's social and economic performance still faced many difficulties and challenges, especially the opening economy of Vietnam, influenced by mixed aspects as the world economy is increasingly complicated and unpredictable. Although COVID-19 has been basically contained in Vietnam, complicated global developments have disrupted global supply chains and hurt trade, tourism and transportation, and unemployment will increase damage to social security.

GSO believed that Vietnam's economy will face numerous difficulties in 2021. Achieving the growth target of 6.5% is a huge challenge. Vietnam needs cooperation and consensus of the Government, businesses and people.

In the short term, according to GSO, it is necessary to control the COVID-19 pandemic well, quickly deploy COVID-19 vaccinations, and adopt solutions so businesses can quickly and effectively access support packages and speed up public investment disbursement.

The agricultural sector needs to adapt to appropriate rice structure, cultivated area, stock structure, and respond to climate change.

In particular, it is necessary to support the business community to deal with difficulties in consumer markets like finding and expanding export markets, supporting taxes and export tariffs, and stimulating domestic consumer demand.

By Quynh Chi, Vietnam Business Forum