Vietnam: Macroeconomic Country Outlook
- GlobalData forecasts 6.6% real GDP growth in 2022, up from 2.7% growth recorded in 2021.
- Vietnam was ranked 62nd out of 136 nations in the GCRI Q1 2022.
- Industrial production for the country was recorded at 22.2% (Y-o-Y) in April 2021.
Vietnam was one of the very few economies that skipped recession in 2020, even though the outbreak of COVID-19 pandemic took place. According to GlobalData, Vietnam recorded a growth of 2.9% in 2020, compared to some of the peer nations, including Indonesia (-2.1%), Singapore (-5.4%), India (-7.3%), and the Philippines (-9.6%). In addition, despite the second and third wave of the COVID-19 pandemic which took place in 2021, the country’s economy grew by 2.7% in 2021. According to GlobalData, the economy is forecast to grow at an average annual rate of 6.6% between 2022 and 2025.
Key findings
- Economic growth to bounce back in 2022: With effective vaccine rollouts and stimulus measures implemented by the government, GlobalData forecasts 6.6% real GDP growth in 2022, up from 2.7% growth recorded in 2021. The manufacturing sector growth in Vietnam gathered pace in Q1 2022. Marked increases in output, new orders and exports were recorded, leading to stronger rise in employment and purchasing activity in March 2022. The state budget has allocated spending of around VND1.8 quadrillion ($78.1 billion) in 2022 to aid economic recovery.
- Vietnam to be benefitted from the Regional Comprehensive Economic Partnership (RCEP): According to the World Bank, Vietnam’s economy is to benefit from RCEP. In a baseline scenario, the tariff faced by Vietnam would be reduced from 0.6% to 0.1% during the period 2020–35. As per the World Bank, the electrical equipment and machinery industry is expected to expand by 12.1% due to reduced tariff, followed by textiles and apparel which is expected to expand by 9%. In addition, with implementation of the RCEP, Vietnam would have access to high-end markets, including Australia, New Zealand, and Japan. Moreover, sectors including tourism, education, entertainment, healthcare, IT, agriculture, automobile, and telecommunication are expected to greatly benefit with implementation of the RCEP.
- Vietnam is ranked 70th out of 190 countries globally in the World Bank’s doing business ranking in 2020: According to the World Bank’s Ease of Doing Business Report 2020, Vietnam scored 69.8 out of 100, higher than the East Asia and Pacific (EAP) regional average of 63.3. This comparatively high score helps the country to attract foreign investment. Starting a business in Ho Chi Minh City takes 16 days with eight procedures as compared to the East Asia and Pacific (EAP) average of 25.6 days with 6.5 procedures. To start a business in Ho Chi Minh City, the paid-in-minimum capital required as percentage of income per capita is zero.
- Vietnam has a young population: In 2021, approximately 24% of the population was below 15 years of age and around 69.0% was aged between 15 and 64, according to GlobalData. Large working-age population reduces financial burden of providing security payments to the elderly population. However, according to the IMF, Vietnam’s population is expected to age rapidly in the coming decades, which will require adequate reforms to protect vulnerable groups.
- Vietnam approves ‘National Strategy for Environmental Protection to 2030, with a Vision to 2050’: In April 2022, the government approved Vietnam’s National Strategy for Environmental Protection to 2030, with a Vision to 2050. The goals for 2030 include increasing areas of natural ecosystems that can be protected and restored, and developing the economy and society toward achieving a green economy and responding to climate change by conserving biodiversity and using it sustainably. The Vision for 2050 includes effectively restoring and conserving endangered, precious, and rare genetic resources and promoting the effective use of biodiversity and ecosystem services.
- Government announces budget 2022: In January 2022, the government announced Vietnam’s budget for 2022. According to the budget 2022, the budget collection is estimated to be $61.7 billion, while expenditure is estimated to be at $78.1 billion. The budget deficit for 2022 is projected at $16.3 billion (4% of GDP). According to the General Statistics Office of Vietnam, the social security received attention where the government envisages supporting families affected by rain and flood in early 2022. The government decided on supplying free rice from national reserves.
Key fundamentals
Sectoral outlook
- Construction sector to witness recovery in 2021: Vietnam’s construction output grew by 6.2% in 2021. GlobalData expects the construction industry to grow by 10.7% in 2022, and then expand at an annual average rate of 11.4% between 2022–23. The government plans to speed up spending on infrastructure projects, which is expected to help support the overall construction output growth. It will focus on improving regional connectivity through the development of the country’s rail, road and air transport infrastructure. The government hopes to attract private investment to finance this development which will aid recovery for 2023.
- Positive outlook for tourism sector in 2022: Vietnam has risen on the international tourism stage in recent years. According to the World Travel and Tourism Council, tourism contributed 7% towards GDP in 2019. However this contribution decreased to 3.5% in 2020, due to the outbreak of COVID-19 pandemic, which led to imposition of domestic lockdowns and international travel ban. In 2020 and 2021, the number of international tourists plunged 78.7% and 95.9%, respectively. However, in March 2022, Vietnam opened its borders to international tourists. According to the General Statistics Office of Vietnam, the country witnessed over 192,400 international arrivals in the first four months 2022, an increase of 185% annually. According to the Vietnam National Administration of Tourism, the government aims to welcome five million international tourists in 2022. Moreover, in March 2022, the Ho Chi Minh City Department of Tourism and the Vietnam Airport Ground Services Company Limited signed an agreement with respect to boosting sustainable tourism and recovery nationwide. The 2022–27 agreement mainly focusses on raising the quality and quantity of tourism across Vietnam. GlobalData forecasts tourists' arrivals to increase at a CAGR of 13.5% between 2022–25.
- Manufacturing sector expected to perform strong in 2022: In Q1 2022, the manufacturing sector played an important role in helping speedy economic recovery for the country. According to the General Statistical Office of Vietnam, the index of industrial production witnessed an overall rise of 7.07% in Q1 2022, compared to the same quarter of previous year. In addition, the consumption index of the manufacturing industry increased by 6.6% in Q1 2022, compared to 5.8% recorded in Q1 2021. Export orders, along with strong domestic demand for consumer goods, showed signs of improvement in early months of 2022. Moreover, survey results of business trends of enterprises in the processing and manufacturing industries showed that industries were optimistic about the overall business situation in Q2 2022.
GlobalData Country Risk Index (GCRI) – Q1 2022
Vietnam was ranked 62nd out of 136 nations in the GCRI Q1 2022. The country’s risk score was 42.3 out of 100 according to the GCRI, placing it in the manageable risk nations band. The country witnessed a significant decrease in risk score related to macroeconomic, legal environment, technology and infrastructure, and environmental risks. Vietnam's overall risk score was higher than the average scores of Eastern Europe (39.4), Asia-Pacific (30.3), but below World (43.5), Latin America (48.7) and Africa (51.7).
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy and future expectations.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Asia Pacific nations in this publication include China, Malaysia, Thailand, Indonesia, Singapore, Australia, Vietnam, the Philippines, Vietnam and New Zealand.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: Vietnam
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