Vietnam’s economy is forecast to strongly recover and to post positive development prospects in 2022 and 2023, ADB experts told the Asian Development Bank (ADB) Press Conference on Vietnam’s Development Outlook 2022 on April 6.

Growth in Vietnam’s economy is expected to rebound to 6.5 per cent this year and further expand to 6.7 per cent in 2023 due to high vaccination rates, trade expansion, and continued accommodative monetary and fiscal policies. “The renewed Covid-19 outbreak hindered Vietnam’s economic recovery, tightened the labor market, and disrupted manufacturing and supply chains in 2021,” said Mr. Andrew Jeffries, Country Director of ADB for Vietnam. “However, the timely shift of the pandemic containment strategy helped restore economic activity and reduce bottlenecks in the business environment.”

Agricultural output is forecast to grow 3.5 per cent this year, contributing 0.4 percentage points to GDP growth on revived domestic demand and rising global commodity prices. The government’s tourism-reopening policy, implemented in March, and the lifting of pandemic controls are expected to boost services, with the sector forecast to grow 5.5 per cent and contribute 2.3 percentage points to GDP growth this year.

According to Mr. Nguyen Minh Cuong, Principal Country Economist of ADB for Vietnam, with opportunities from free trade agreements (FTAs), the prospects for FDI in Vietnam will continue to grow due to the diversification of the country’s import and export markets. Although many orders have moved out of Vietnam, no foreign investors have withdrawn from the country. “FDI inflows will remain stable in the time to come as investors remain optimistic about Vietnam’s investment environment and business activities,” Mr. Cuong said.

ADB experts also forecast that external trade will remain robust this year. The Regional Comprehensive Economic Partnership (RCEP) is expected to accelerate trade and recovery once the Covid-19 pandemic passes, forming stable and long-term export markets for Vietnam and creating a legally-binding foundation for expanding trade. Goods exports are forecast to rise 8-10 per cent this year.

Imports will rise on increased demand for capital goods and manufacturing inputs, as well as rebounding domestic consumption. The recovery of tourism and remittances will support a current account surplus, forecast at 1.5 per cent of GDP this year and 2.0 per cent in 2023. “Even though there are global uncertainties and the impact of the Russia - Ukraine conflict, there are agreements that put Vietnam in a better position and help it overcome the obstacles,” said Mr. Jeffries.

Along with the positive prospects, slowing global recovery and a surge in global oil prices due to the Russia - Ukraine conflict will directly affect Vietnam’s external trade and domestic oil prices, which will in turn affect inflation.

Uncertainties in global financial markets and the withdrawal of monetary and fiscal accommodation by advanced economies will also put additional upwards pressure on inflation, which is forecast to accelerate to 3.8 per cent in 2022 and 4.0 per cent in 2023, though such levels are still under control. Mr. Cuong also emphasized that if Vietnam does not quickly and effectively implement monetary support packages in the government’s economic recovery and development program (ERDP), it will greatly reduce their effect on economic recovery in 2022.