Vietnam's Economic Miracles in 2022

9:15:28 AM | 1/5/2023

In 2022, the world economy experienced substantial uncertainties, which exerted a strong impact on the domestic economy. In that context, Vietnam's economy achieved many encouraging results, building up a foundation for rapid and sustainable development in 2023 and beyond.

GDP growth at 8.02%, 2.5 times higher than inflation

In 2022, the domestic economy grew well in the face of the challenging global economy. The world’s leading economies had to cope with numerous difficulties and witnessed a decline in aggregate demand, resulting in certain weaknesses in our country's international trade. Risks intertwined with instability forced economies to trade off macro management solutions. Inflation continued to be a top concern of many economies, with complicated and unpredictable fluctuations in energy and food prices. Signs of a global recession were becoming clearer and the world economy was suffering from a multi-layered crisis not easily solved in the short term.

Vietnam's economy is opening wide, with its production largely reliant on imported virgin materials and fuels, resistance and limited competitiveness. Even a small change in the world may have a big impact on the domestic economy and society.

In that context, Vietnam's economic growth performed a miracle in 2022, reaching 8.02%, higher than many estimations.

The economic restructuring moved in the right direction, with a lower share of agriculture, forestry and fishery and an increased share of industry and construction.

In the general growth picture, the agriculture, forestry and fishery sector expanded 3.36%, ensured the full food supply with stable prices to lay the foundation for curbing the full-year inflation growth of 3.15%, much lower than the target of 4%, despite high food prices in many countries around the world.

The economic growth is 2.5 times higher than the inflation growth. This is a "proud difference" in the context that the world is facing the highest inflation in 40 years and slowing growth.

Reinforcing and affirming Vietnam's economic position in int’l trade

Vietnam's economic position in international trade has been consolidated and confirmed. While global aggregate demand declined, supply chains were disrupted, and export producers faced difficulties in input supplies and consumption markets, the merchandise export value increased year by year. These reflected the dynamism and effort to deal with hardships to find input sources and seek consumer markets.

The merchandise import and export value surpassed US$730 billion, with 36 items exceeding US$1 billion each. For the first time, seafood exports reached US$10 billion, making Vietnam the third largest seafood exporter in the world, accounting for over 7% of the global market share. The trade surplus was as high as US$11.2 billion, helping reduce forex pressures in the market.

FDI – a bright spot in declining international trade and investment

Foreign direct investment (FDI) into Vietnam is the bright spot of the economy amid weakening international trade and investment. In 2022, as many as 1,107 projects registered to increase their investment fund by nearly US$10.12 billion. Foreign investors actually spent US$22.4 billion of FDI capital in the year, up 13.5% compared to 2021.

In particular, FDI was shifted into high-tech industries in line with the government’s policies of improving quality and prioritizing modern and technologically pervasive projects to create highly competitive products while meeting green and sustainable development goals and integrating Vietnam's economy deeper into global supply networks.

FDI and international trade data show that investors are placing great confidence in Vietnam’s investment environment and economic position in the global supply chain.

The world assesses that Vietnam is playing an important role in promoting international trade and is committed to expanding investment in Vietnam in the coming time.

Dynamic, flexible and active business community

In 2022, Vietnam’s economy developed quite comprehensively and achieved 14 out of 15 socioeconomic targets assigned by the National Assembly. This outcome was partly contributed by the dynamic and flexible business community.

Pandemic consequences caused businesses to face high prices of input materials, fuels and logistics; insufficient components for assembly and manufacturing; inadequate capital and financial resources; labor shortages and regulatory barriers.

In such difficulty, the business community remained firm to do business, with 148,500 companies being established in the year and 59,800 resuming normal operations. On average, 17,400 companies were established and returned to normal operation per month.

The government acts quickly and flexibly to foster socio-economic development

Together with a dynamic business community that strived to overcome all difficulties, the Government with its innovative thinking, prompt and flexible action and performance-based priority, effectively facilitated by the National Assembly’s policies and solutions launched and executed at the right time, provided good conditions for production and business, cleared bottlenecks and addressed economic inadequacies, maintained macro stability, and fostered economic growth and social development in an uncertain world.

With bright spots in the economic picture, Moody's upgraded Vietnam's credit rating from Ba3 to Ba2 with a stable outlook. Fitch Ratings gave it a BB rating with a "positive" outlook. Nikkei Asia upgraded Vietnam's COVID-19 recovery index to 2nd in the world.

Impressive achievements but shortcomings still remain

The socioeconomic picture of Vietnam in 2022 would have been sharper and more impressive if some inadequacies in institutions and the business investment environment had been removed in time, and if a part of the public employees in the administrative apparatus had raised their sense of responsibility to businesses and people in handling the latter’s difficulties.

During the year, Vietnam witnessed 208,300 companies establish or resume normal operations but 143,200 companies went bankrupt.

If public investment, the growth engine of the economy, had been disbursed faster, the effect would have been stronger. For Vietnam’s economy, if public investment disbursement increases by 1%, GDP will gain by 0.058%.

Especially, as weakening global aggregate demand affected Vietnam's exports, accelerating public investment capital disbursement was an important and effective solution to restore and improve economic capacity and competitiveness, boost growth and offset export declines.

Commodity export is the growth engine of the economy. However, Vietnam's export turnover depends too much on some products and the FDI sector.

Eight product groups accounted for 70.1% of the total export value. Telephone and electronics - two FDI-led products - accounted for 30.8% of total export value. This reflected the vulnerability of the country's international trade.

In particular, terms of trade decreased by 1.36% in 2022, reflecting that the economy needed more than the value of exports to exchange for a number of imported goods compared to 2021. Besides, many businesses did not utilize the benefits of FTAs to promote exports.

In 2022, the world economy was volatile and the domestic economy was considerably affected. But in that context, Vietnam's economy achieved many encouraging results and created a position and force for the country to develop quickly and sustainably in 2023 and beyond.

Mr. Krishnakanth Kodukula, General Director of Zamil Steel Buildings Vietnam Co., Ltd

Vietnam has a favorable investment environment with a convenient geographical position for trade, a stable economy and politics, a young population, competitive labor prices, and active support of the Government in creating a favorable environment for FDI companies to do business. These are competitive advantages that make Vietnam an attractive destination for investors from major economies.

As the first Saudi Arabian investor in Vietnam, Zamil Steel appreciates the efforts of the Vietnamese Government in improving the investment environment over the past 25 years. Vietnam has been completing legal frameworks, building synchronous infrastructure, developing a high-quality workforce and helping foreign investors better access the domestic market by taking part in many international organizations and trade agreements.

In the coming time, FDI inflows into Vietnam will increase as Vietnam is gradually rising to become the new manufacturing base of the world. With the shift of supply chain and the change of the global economy and politics, more multinational companies will be looking for supply chain diversification and Vietnam will be a perfect destination for manufacturers thanks to its strategic location, competitive workforce and production costs. Therefore, in the coming time, the Government and policymakers of Vietnam will give priority to training and improving worker skills for many occupations, including new ones like electronics manufacturing, robotics and artificial intelligence. This will help Vietnam attract investment in many high-tech, electronics and biotech sectors.

Mr. Binu Jacob, CEO of Nestlé Vietnam

Nestlé Vietnam is proud to be one of the pioneering foreign direct investment (FDI) companies to support the sustainable and inclusive growth of Vietnam. We believe that Vietnam has proven a strong attraction as an investment destination with a long-term and sustainable vision through the following factors:

First, political stability and flexibility: This is the top factor of concern for an FDI investor. Besides, the Government of Vietnam proved decisive in operating and did not hesitate to make courageous and strong decisions in many circumstances.

Second, strategic geographical location: Vietnam is located in an extremely central position in Southeast Asia with a long coastline. The country possesses a huge advantage with important trade routes in the world.

Third, abundant young workforce: Vietnam, with a population of approximately 100 million people, is among the 15 most populous countries in the world and has a “golden population structure”, which means that every two workers take care of only one dependent.

With this advantage, Vietnam has an opportunity for socioeconomic development that not all have, and you need to make good use of this.

Fourth, active integration into the regional and global economy: In the past few years, the Vietnamese Government has achieved many successes in international economic integration with accession to many free trade agreements and economic communities like the World Trade Organization, the EU-Vietnam Free Trade Agreement and the ASEAN Economic Community.

By Vietnam Business Forum