ADB: Vietnam’s economy will continue to recover in the last months of the year

International Business News  –  The Asian Development Bank (ADB) held a press conference in Hanoi on the morning of September 21 to release a supplement to the Asian Development Outlook 2022, which maintains Vietnam’s economic growth forecast for this year and next at 6.5% and 6.7%, respectively.

ADB Country Manager Andrew Jeffries forecast that Vietnam’s economy will recover faster than expected in the first half of 2022 and will continue to grow against the backdrop of the many challenges facing the global economy. The domestic economy is recovering steadily, thanks to steady economic advance indicators and the recovery of processing manufacturing and services.

However, the Vietnamese economy will continue to face increasing risks. Meanwhile, the global economic downturn may affect Vietnam’s exports, and labor shortages may have a significant impact on the rapid recovery of labor-intensive industries – services and export processing manufacturing.

Delays in public investment and social spending in place, especially the slow implementation of the government’s economic recovery and development plan, could also lower growth rates this year and next.

ADB’s chief economist in Vietnam said that Vietnam’s economy is still showing a good momentum of development against the backdrop of increasing global uncertainty. Global food supply chains are gradually recovering, helping to increase agricultural production this year, but high input costs have hindered the recovery of the agricultural industry.

Shrinking demand in world markets is slowing growth in domestic manufacturing. Vietnam’s manufacturing purchasing managers’ index (PMI) edged down to 52.7 in August from 54 in June. However, the outlook for manufacturing remains positive as foreign direct investment remains bullish on the sector.

People-to-people exchanges in Vietnam have also returned to normal. The lifting of entry restrictions on epidemic prevention has also contributed to a strong recovery in the tourism industry in the second half of 2022. This is a growth engine for the service industry and other related industries.

High inflation in Europe and the United States is also a factor that increases domestic inflation pressure in Vietnam. However, prudent monetary policy and price stabilization measures, especially controls on oil prices, have helped Vietnam keep inflation at 3.8% in 2022 and 4% in 2023. These indices are almost in line with the forecasts in the April 2022 report of the Asian Development Outlook.

Rising investment, subdued inflation and expansionary fiscal and monetary policies are expected to boost domestic consumption and drive the recovery in 2022. In the second half of this year, the prices of some consumer goods may rise, and the prices of commodities under special state control may rise or increase inflationary pressures.

Although the business environment has gradually improved in the first eight months of 2022, the operating performance has begun to show signs of slowing down, and the number of newly registered companies in August has declined slightly. This downward trend reflects challenges in the recovery of operations, including labor shortages and a decline in new orders.

From a broader perspective, risks to Vietnam’s economic outlook remain high. Increased global geopolitical uncertainty may push up prices and affect inflation in Vietnam.

The report also mentioned challenges to Vietnam’s health system and that labor shortages may have an impact on the recovery of services and exports.

The report also pointed out that the slow arrival of public investment funds and social spending may reduce Vietnam’s economic growth this year and next.