This time last year, the economy’s index for industrial production (IIP) increased only 1.6 per cent against the same period of 2020, when it declined 0.4 per cent due to the pandemic, which has affected over 1.6 million people and killed nearly 29,400 so far.
However, over the past few months, concerns over the health crisis seem to have been subdued as the vaccination programme was successfully deployed. Average cases of coronavirus have dropped to about 1,000 cases a day as of late last week.
With hundreds of thousands of factories halting operations in 2021, affecting the lives of millions of workers, a plight occurs that had never been seen before in Vietnam’s business and production landscape.
But since mid-March, the government has opened its border gates for international tourists, with all activities in the economy returning to normalcy.
“Currently, Vietnam is among six nations with the biggest coverage of vaccine inoculation in the world, and winning high appreciation from the international community,” Deputy Prime Minister Le Van Thanh told the National Assembly. “The good control of the pandemic has strengthened the confidence and security of people and enterprises, importantly contributing to socioeconomic recovery and development.”
The General Statistics Office last week reported that despite global uncertainties including the Russia-Ukraine conflict and China’s strict pandemic strategy, Vietnam’s industrial production has been recovering strongly since early this year. The IIP in Q1 increased 6.4 per cent on-year but rose to 7.5 per cent in the first four months, and 8.3 per cent in the first five months.
In the first five months, Vietnam saw 98,600 enterprises newly established or resuming operations, up 25.8 per cent on-year. Each month witnessed 19,700 enterprises of these types.
Also, total goods retail and consumption service revenue is estimated to be $98.1 billion, up 9.7 per cent against the on-year climb of 7.6 per cent in the same period last year.
“The positive figures show that the economy is very positively recovering thanks to policies in favour of people and enterprises. It is forecast that domestic production and business activities will continue flourishing for the whole of 2022,” Minister of Planning and Investment Nguyen Chi Dung told the National Assembly Standing Committee.
After months of halted operations last year, a Dien May Xanh supermarket selling electronics and home appliances in Hanoi’s Tay Ho district has experienced a bustling atmosphere with hundreds of visitors a day over the past five months.
“Sales have begun to bounce back since Lunar New Year. Consumption is on the rise, and our revenues in the first five months of 2022 are gradually recovering as they did in the same period of 2019,” a salesman at the supermarket said. “Previously, sales were very slow.”
An HC supermarket, also selling similar items and based in the capital’s Pham Van Dong street, has also been seeing its difficulties eased thanks to increased sales this year, with many visits by customers a day who buy laptops, mobile phones, refrigerators, and air conditioners.
“Previously we could sell one or two refrigerators a day, but now the figure can be as much as 10. This also means our incomes have also increased,” a saleswoman said.
According to the Ministry of Planning and Investment’s Foreign Investment Agency, in the first five months of this year, disbursement of foreign direct investment (FDI) is estimated to reach $7.71 billion, up 7.8 per cent on-year.
Investors added $5.61 billion to their 395 operational projects, up 45.4 and 15.5 per cent in capital and project numbers, respectively. Moreover, total paid-in capital hit over $1.98 billion, up 51.6 per cent on-year.
Foreign investors poured money into 18 out of 21 economic sectors, in which the manufacturing and processing sector received the most FDI, at over $6.8 billion or 58.2 per cent of total registered FDI of $11.71 billion registered as of May 20 – down 16.3 per cent on-year. “This reflects big expectations and confidence of investors in the country’s economic growth recovery,” said Minister Dung.
Over a week ago, HSBC released a report on its survey of more than 1,500 companies from China, France, Germany, India, the UK, and the US, all of which have operations in Southeast Asia.
Results showed that Indian, Chinese, and US companies were similarly enthusiastic about Vietnam’s supportive government and regulatory environment. About 49 per cent of Indian companies mentioned this, making it the single most attractive factor for companies from the country; 33 per cent of US companies, and 30 per cent of Chinese companies also selected this.
By contrast, only 15 per cent of British firms and 8 per cent of those from Germany considered this an attractive feature of Vietnam.
Enthused by Vietnam’s regulatory environment, US companies were very attracted by the opportunity Vietnam affords to test and develop new products/solutions, with 36 per cent stating they found this attractive.
A survey on business investment in 2021 by the American Chamber of Commerce in Vietnam (AmCham) showed that nearly 80 per cent of its members saw very positive medium- and long-term prospects in the Vietnamese market.
“There is no doubt that we have had a transformative role in the development of Vietnam. From managerial practices and technologies to service standards and ethics, the US business community here has affected Vietnam in many positive ways and foreign investment has helped to promote economic and social development here,” Adam Sitkoff, executive director of AmCham in Hanoi, told VIR. “US-Vietnam trade was just $451 million in 1995 but the figure was over $110 billion last year, and US companies and investors are active in almost every sector of Vietnam’s economy.”
According to HSBC, Vietnam’s GDP growth is expected to make an impressive recovery over the course of 2022, at 6.2 per cent following a 2021 low of 2.58 per cent.
“Playing an important role in this story – and in the greening of the economy that sustainable growth requires - will be international companies attracted by the many benefits this market has to offer,” said an HSBC report. “As Vietnam continues to play a balancing act in the geopolitical dynamics of its region, its economic growth will nevertheless continue apace.”
Global analysts FocusEconomics told VIR in a statement that industrial growth this year in Vietnam is projected to accelerate markedly from 2021’s reading. Moreover, Vietnam is an attractive low-cost base for manufacturing firms, including those looking to relocate from China due to US-China trade tensions and ongoing tough pandemic measures in the Asian superpower.
It also said that this year, the Vietnamese economy should grow at the joint-highest rate in the region and notably faster than in 2021. The release of pent-up consumer and capital spending will fuel activity, aided by the external sector and the government’s post-pandemic recovery and development programme worth $15 billion.
“Our panellists expect GDP to expand 6.7 per cent in 2022, which is up 0.1 percentage points from last month’s forecast, and 6.9 per cent in 2023,” FocusEconomics said.
The government is expecting the economy will grow 6-6.5 per cent this year.
S&P Global Ratings on May 26 raised its long-term sovereign credit rating on Vietnam to “BB” with a “stable” outlook on the back of strong economic recovery.
Vietnam is one of the only two Asia-Pacific nations that have had its ratings upgraded since the beginning of this year, factoring in that Vietnam’s economy remains on a solid track to recovery following the complete removal of domestic and cross-border mobility restrictions and high vaccination rates.
It is also attributed to the considerable improvement in the government’s public administrative procedures, especially in terms of administering guaranteed debt obligations; Vietnam’s strong economic outlook and external position; and resilient FDI flows.
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