Việt Nam shines amid global economic volatilities

Despite global volatilities, Việt Nam’s economy has rebounded strongly this year beyond forecasts of many international organisations, making the country become a new ‘tiger’ in Asia.

The latest report from the General Statistics Office (GSO) showed Việt Nam's GDP growth rate in the first nine months of 2022 hit a 12-year high to reach 8.83 per cent. Notably, the economy expanded 13.76 per cent in Q3 2022 compared to 7.72 per cent and 5.05 per cent in Q2 and Q1 2022, respectively. The 13.7 per cent GDP expansion in Q3 2022 was a record quarterly growth rate in Việt Nam and surpassed the rate of 13.5 per cent of India to become the highest in Asia this year.

The World Bank attributed Việt Nam’s rebound to a recovery of exports and the release of pent-up demand following the removal of COVID-19-related mobility restrictions and, more recently, the gradual return of foreign tourists.

Việt Nam’s economic growth was reported in all three key sectors, of which services increased by 10.57 per cent, industry-construction up 9.63 per cent, and agriculture-forestry-fishery up 2.99 per cent.

The country’s import-export turnover during the period increased by 15.1 per cent to US$558.5 billion with a trade surplus of $6.52 billion while total retail sales of consumer goods and services surged by 21 per cent.

Besides, the business situation has been continually improving, with the number of newly established enterprises surging by 38.6 per cent to more than 163,000.

Disbursement of foreign direct investment (FDI) in the first nine months of this year also surged 16.2 per cent year-on-year to $15.4 billion, marking a five-year record high, the Ministry of Planning and Investment's Foreign Investment Agency (FIA) reported.

These positive figures showed foreign-invested enterprises have been constantly recovering and expanding their production and business activities in Việt Nam, which has reflected business confidence in the country’s success in maintaining macroeconomic stability, FIA said in its September report.

According to Prime Minister Phạm Minh Chính, the economy has recovered very positively, with many cities and provinces nationwide reporting impressive Gross Regional Domestic Product (GRDP) growth in the first three quarters, including HCM City with 9.97 per cent, Hà Nội with 9.69 per cent, Bắc Ninh with 9.7 per cent, Hải Dương with 10.14 per cent, Quảng Ninh with 10.12 per cent, Hải Phòng with 12.06 per cent, Cần Thơ with 17.57 per cent, Đà Nẵng with 16.76 per cent, Khánh Hòa with 20.48 per cent and Bắc Giang with 23.98 per cent.

Notably, Minister of Planning and Investment Nguyễn Chí Dũng said the country’s high economic growth has been accompanied by stabilising the macro-economy, successfully controlling inflation, ensuring major balances of the economy and improving people's living standards.

The GSO reported the country’s average consumer price index in the first nine months was only 2.73 per cent while State budget revenue and total investment capital of the whole society surged by 22 per cent and 12.5 per cent over the same period in 2021, respectively.

Many international organisations have been so far surprised by the very high growth rate of above 13 per cent of Việt Nam in the third quarter of this year. The impressive surge has resulted in their upgrade of the country’s economic growth forecast, of which Moody’s, Fitch Ratings, World Bank (WB) and International Monetary Fund (IMF) predict Việt Nam's GDP growth in 2022 at 8.5 per cent, 7.9 per cent, 7.2 per cent and 7 per cent, respectively

The upgrade is very notable when the organisations have lowered their 2022 global economic growth outlook. For example, in last month’s report, while having raised its GDP growth forecast for Việt Nam this year to 7.5 per cent from 5.3 per cent in April, the World Bank projected the overall rate of the East Asia and Pacific region to slow to 3.2 per cent this year from 7.2 per cent in 2021.

Moody's Investors Service last month also upgraded the Vietnamese Government's long-term issuer and senior unsecured ratings to Ba2 from Ba3. Việt Nam is the only country in the Asia-Pacific region and one of four countries in the world that have had their credit rating upgraded by Moody's since the beginning of the year.

Moody’s noted in the report: “The upgrade to Ba2 reflects Việt Nam's growing economic strengths relative to peers and greater resilience to external macroeconomic shocks that are indicative of improved policy effectiveness, and which Moody's expects to continue as the economy benefits from supply chain reconfiguration, export diversification and continued inbound investment in manufacturing.

“The rating also reflects a sounder fiscal footing backed by contained borrowing costs, a conservative approach to fiscal policy and improved government liquidity, driven by the ongoing transition from external concessional borrowing toward longer-dated, low-cost domestic market financing.”

According to Trần Văn Sơn, Minister of the Government Office, international organisations have positive assessments of Việt Nam's socio-economic situation. They forecast the country's economic growth rates in 2022 and 2023 will be among the highest in Southeast Asia.

Economist Brian Lee Shun Rong at Malaysia's largest financial services group Maybank believed as a rising star in the global supply chain, Việt Nam has the potential to become a new ‘tiger’ in Asia after the Republic of Korea (RoK), Singapore, and China's Taiwan and Hong Kong.

Exceeding targets

The strong GDP recovery in the first nine months of the year, especially in Q3, has created a prerequisite for Việt Nam’s vigorous growth in 2022 and the country is so far estimated to meet nearly all 15 targets set for this year. According to the National Assembly's (NA) Committee for Economic Affairs, 15 social-economic development targets, except the social labour productivity growth rate, are expected to be met or exceeded this year.

Right after the nine-month socio-economic statistics were published, the Ministry of Planning and Investment also decided to adjust up the 2022 economic growth scenario. Accordingly, the ministry proposes to strive for a full-year growth of 8 per cent, about 1.5-2 percentage points higher than the 6-6.5 per cent target assigned by the National Assembly and set by the Government.

According to experts, production and service activities in Việt Nam have returned to normal and the country will continually benefit from the global supply chain shift, which will contribute to strongly boosting up the country’s exports.

However, in the context that the world economy will continue to face many difficulties in the last months of the year and the demand for imported goods from countries that are the main trading partners of Việt Nam such as the US and the EU will decrease, members of the NA’s Committee for Economic Affairs said it is necessary to have policies to support credit for exports in the remaining months of the year and in 2023.

Besides, Minister Dũng noted the country needs to promote the disbursement of public investment capital to achieve a high growth rate in the rest months of the year.

According to the Ministry of Finance, the total public investment capital will be some $24.3 billion in 2022, about $4.2 billion larger than in 2021. By the end of September, the disbursement of public investment increased to more than $10.6 billion, but the new rate reached merely 46.7 per cent of the plan assigned by the Prime Minister, 0.7 per cent lower than in the same period 2021.

Besides, Dũng said, to promote economic growth in Q4, it is also necessary to better implement the Government’s socio-economic development and recovery programme, which includes a VNĐ40 trillion interest subsidy package for pandemic-affected customers, as the capital disbursement of the package remains limited.

Higher economic growth rates in Q4 and the whole of 2022 will be a driver for the country next year when many potential risks emerge, Dũng said.