Many Driving Forces for Economic Growth

9:20:36 AM | 2/25/2022

Vietnam is among the countries with the highest vaccination coverage and the country has adopted safe, flexible adaptation to and effectively controlled the COVID-19 pandemic. These are considered important foundations for a quick economic recovery to realize the targeted GDP growth of 6-6.5%, the GDP per capita of US$3,900, and the disbursement of 100% planned public investment capital.

Over the past time, many domestic and foreign institutions such as WB, IMF, ADB and HSBC made optimistic forecasts for Vietnam's economic growth in 2022.

According to international organizations, Vietnam's economy will thrive in 2022. According to the World Bank in Vietnam, the economy will rebound in 2022, with GDP growth forecast at 5.5%. Given that the pandemic is basically controlled, its economy will recover partly thanks to fiscal policy easing at least in the first half of the year. In the medium term, the WB estimated that Vietnam's economy will only start to return to the growth trajectory in 2023 when domestic demand is fully recovered and there are no new shocks.

The Asian Development Bank (ADB) said, Vietnam's economic growth was forecast at 6.5% in 2022. ADB believes that export activity will continue to be a growth engine, powered by an effective approach to free trade agreements (FTAs).

Meanwhile, according to The Hongkong and Shanghai Banking Corporation (HSBC), Vietnam's economy can regain its GDP growth of 6.8% in 2022, mainly boosted by strong renewed foreign investment inflows, focused on manufacturing and green development.

Mr. Tran Quoc Phuong, Deputy Minister of Planning and Investment, said, in 2022, Vietnam's economy will recover quickly, efficiently and strongly and return to the trajectory of sustainable development. The country has drawn a lot of lessons in pandemic prevention and control, macroeconomic stability, higher-than-estimated budget revenue; and high export and import value. In addition, Vietnam has recovery solution packages to revive all economic sectors in the context of the complicated pandemic.

January figures showed that the above forecasts were completely grounded. According to the General Statistics Office (GSO), after just over two months of executing Resolution 128/NQ-CP dated October 11, 2021, the country gradually restored socioeconomic activity and brightened the business outlook in the first months of 2022.

Specifically, in January 2022, corporate registrations increased in both number and value from a year earlier. The number of enterprises resuming operations also rose sharply in all areas of operation. This was a positive signal for business development in 2022. Also in January 2022, Vietnam had 13,000 new companies with a combined registered capital of more than VND192.3 trillion (US$8.34 billion), which registered to employ nearly 77,100 workers, an increase of 15.9% in enterprises, 22.6% in investment value and 10.5% in employees over the previous month and up 28.9% in enterprises and 24% in value, but down 33.5% in employees from a year earlier. Besides, 19,100 companies resumed their operations, an increase of 352.8% over December 2021 and 194% over January 2021. In total, 32,100 companies became active in January, up 93.6% year on year.

The January trade value totaled US$58.5 billion, down 11.7% from the previous month, of which exports were worth US$29 billion and imports valued US$29.5 billion. Compared to the same period in 2021, the trade value, exports and imports rose 6.3%, 1.6% and 11.5%, respectively.

These very optimistic signals will underpin Vietnam’s recovery process in the coming time. However, to achieve the above targets, Vietnam needs to effectively adopt the policy on safe, flexible adaptation to and control of the COVID-19 pandemic; strengthen stimulus policies to boost domestic consumption, public investment and smart tourism development.

However, the world economy did not show many positive signs. According to the World Bank, global growth was forecast to slow down sharply from 5.5% in 2021 to 4.1% in 2022 and 3.2% in 2023 as pent-up demand diminishes and monetary and fiscal support policies fade in the world.

The rapid contagion of the Omicron variant shows that the pandemic is likely to further disrupt economic activities in the near future. Besides, growth in major economies such as the United States and China decelerated significantly, thus affecting the demand of emerging and developing economies. When governments in developing countries run out of resources for economic support, new COVID-19 outbreaks, inherent bottlenecks in supply chains, inflationary pressures, and escalating financial instability in many parts of the world may risk hard landing.

By Anh Mai, Vietnam Business Forum