GDP growth recovered in the first half of 2021, supported largely by an expansion in trade. But a resurgence of the COVID-19 pandemic in April tightened the supply of labor, lowering industrial output and disrupting agriculture value chains. Growth is now projected at 3.8% this year and 6.5% in 2022, both lower than ADO 2021’s forecasts, those are the assessments in the latest ADB’s economic projection.
Inflation will be muted in 2021 and 2022, with the rate below earlier projections. The current account is expected to deteriorate, turning a deficit this year compared with a projected surplus in ADO 2021 and returning to a surplus in 2022, albeit a lower one than earlier projected.
The economy gained momentum in the first 6 months of 2021, with GDP growth accelerating to 5.6% from 1.8% in the first half of last year. This was, however, still lower than prepandemic growth of 6.8% in the first half of 2019. Strong export demand drove agriculture, forestry, and fisheries growth up to 3.8% from 1.2% in the first half of 2020 and 2.3% in the same period in 2019.
This output contributed 0.4 percentage points to first-half growth. First-half industry growth more than doubled to 8.4% year on year, just below 8.9% in the same period in 2019, contributing 3.0 percentage points to GDP growth.
Services rose by 4.0% year on year, but still lower than 6.7% in the first half of 2019 as international tourist arrivals plunged by 97.6% year on year. The contribution of services to GDP growth declined to 1.7 percentage points year on year.
The spread of COVID-19 and an extended lockdown since June dampened the recovery. The strict lockdown in Viet Nam’s southern region and in Ha Noi and surrounding industrial areas, which contribute nearly 50% of the country’s GDP, dragged down the index of industrial production in August to 4.2% month on month and 7.4% year on year. The index rose 5.6% year on year in the first 8 months of 2021, lower than 9.5% in the same period in 2019.
Viet Nam’s fourth wave of the pandemic hit enterprises and the labor market hard. In the first 8 months of 2021, nearly 85,500 enterprises suspended operations, 24% higher than in the same period last year. The lockdown and stringent movement restrictions disrupted labor mobility and hampered production. Consequently, 12.8 million people lost jobs or had their incomes reduced.
Rising unemployment and falling incomes dampened private consumption growth to 3.6% in the first half 2021, up only 0.2% from the first half of 2020 and half the level in the same period of 2019. Public consumption growth also halved, to 3.2%, as the government reduced current expenditure.
In August 2021, wholesale and retail trade plunged by 34.9% year on year on the effects of the lockdown.
For the first half of this year, total investment increased 5.7% year on year from 1.9% in the first half of 2020, but this was still lower than growth of 7.1% in the first half of 2019. Investment growth stalled in August.
Investment from the state budget declined by 7.1% month on month, and 24.7% year on year. The disbursement of foreign investment also showed signs of slowing, with year on year growth falling from 6.8% in June to 2.0% in August.
Inflation was 0.25% higher in August than in July as fuel prices increased and disrupted food supply temporarily raised food prices. The inflation rate was 1.5% in the first half and 1.8% in the first 8 months, with impaired incomes, rising unemployment, lower public investment expenditure, and limited mobility depressing demand. The exchange rate between the dong and the US dollar remained relatively stable during the first 8 months, with the local currency trending slightly higher.
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