Vietnam's economy on track of recovery: analysts

Vietnam’s economy is showing signs of improvement as services and manufacturing start to gain back growth momentum amid global challenges, analysts say.

Although difficulties remain, in the third quarter Vietnam’s GDP exceeded two previous periods and expanded 5.33% year-on-year, which is a positive sign, said Nguyen Thi Mai Hanh, head of the Department of National Accounts System under the General Statistics Office.

Manufacturing grew 5.61%, a stark contrast to the 0.49% decline in the first quarter, she said.

There are signs of recovery in the industry sector, she added. Vietnam’s Purchasing Managers’ Index reached 50.5 points in August, indicating an expansion, after five months of contraction.

Exports have also improved, as shown by a 4.6% year-on-year rise in September after six straight months of decline.

Imports also rose 2.6% after falling for 10 months.

Analysts of lender UOB said that Vietnam’s foreign direct investment disbursement rose 2.2% year-on-year in September to $15.9 billion, its fourth month of increase. In the first nine months growth was 17.2%.

"If the same growth rate is maintained for the last months, FDI disbursement will reach $19.7 billion this year, same as in 2021," they said in a report.

Citizens are spending more, as shown by the 9.4% growth in consumer spending in September, after hitting below 7% in the preceding three months.

But Vietnam is still facing troubles in achieving its growth target of 6-6.5% this year.

General Statistics Office (GSO) head Nguyen Thi Huong said that global demands are recovering slowly and inflation remains high, keeping costs of materials and ingredients at a high level. The supply chain is unstable, with many buyers reducing their orders.

Andrew Harker, economics director at S&P Global Market Intelligence, which tracks Vietnam’s Purchasing Managers’ Index, said that the country’s manufacturing sector is at a turning point.

If demand continues to grow, the sector will recover, but if new orders keep falling, businesses will not be encouraged to expand their operations, he said.

UOB has lowered its growth forecast for Vietnam from 5.2% to 5%. The International Monetary Fund maintained its growth forecast at 4.7% and Asian Development Bank has set it at 5.8%.

The Ministry of Planning and Investment pegs growth at 6% maximum, which means that growth in the last quarter will have to reach 10.6%.

Huong of the GSO said that it is necessary to promote consumption and focus on developing the domestic market to effectively exploit the potential market of 100 million people.

The government needs to stimulate trade and services and develop tourism. It should expand and diversify export markets and focus on promoting public investment disbursement, she added.

The investment ministry said that domestic and foreign resources need to be mobilized for development. Attracting largesemiconductor foreign direct investment projects is also an option, it added.