Tourism will be a key area fueling the resilience of Vietnam’s economy in 2023 as there is significant room for growth amid looming global economic headwinds, HSBC’s study says.
“In our view, a 50-80% return of Chinese tourists could be achievable,” the global bank’s latest “Vietnam at a glance” report said, referring to China’s re-opening this January as a good reason to expect a more meaningful recovery for the Vietnamese economy this year.
The predicted return is equal to three million to 4.5 million Chinese tourists.
In addition to China’s re-opening, Vietnamese low-cost carrier Vietjet last September commenced operating flights between Vietnam’s resort island of Phu Quoc and India’s New Delhi and Mumbai. Other routes have also been launched connecting the two countries’ major cities. Indian tourists accounted for 4% of Vietnam’s total foreign arrivals in 2022, from just about 1% in 2019, according to HSBC.
Vietnam’s government has been stressing the easing of visa policy for foreign tourists to attract more of them. The country does not have visa exemptions for major markets including mainland China, the U.S., and Australia, while visa exemptions for some European markets allow travelers to stay up to only 15 days.
Compared to its Asin peers, visa-free access remains relatively tight in Vietnam, but this may change because officials are considering the extension of the visa waiver period to 30 days and the issuance of electronic visas for citizens from all markets.
Another way for Vietnam to facilitate tourism is to diversify tourism products. Sports tourism, a subset of tourism included in the tourism industry vision from the Vietnam National Administration of Tourism (VNAT), could also help attract high-spending travelers.
For example, Hanoi has been aiming to become a leading destination for golf tourism, HSBC underlined in the study, which says that the number of golf courses in Vietnam would likely double to 200 by 2025.
General tourism facility developments are also encouraging. In particular, the supply of high-end accommodations continues to grow, with the number of four or five-star accommodations rising 12% per annum on average pre-pandemic, according to VNAT.
Post-pandemic, a number of global chains have been looking to actively expand their portfolios in Vietnam, reflecting the country’s attractiveness in areas beyond manufacturing.
To mention some, La Festa Phu Quoc, Curio Collection by Hilton is expected to open in mid-2023, and Marriott International is also expecting to add up to 9,000 rooms to its current capacity of around 3,300 rooms.
“With government ambitions and various development projects in play, the structural outlook for international tourism in Vietnam remains positive,” the HSBC report says.
Vietnam started 2023 with decent new FDI inflows of some $1.2 billion. Despite the near-term global electronics down-cycle, tech companies continue to invest in Vietnam. The latest development came from Chinese display maker BOE, a supplier of both Apple and Samsung, which plans to invest an expected $400 million to build two factories.
Meanwhile, European business sentiment showed similar optimism, as indicated in the latest quarterly survey from the European Chamber of Commerce in Vietnam. Although overall FDI dropped in 2022, manufacturing FDI remained resilient, highlighting Vietnam’s competitive advantage in the space.
In terms of monetary policy, HSBC said in the study that it expects the State Bank of Vietnam to raise the central bank’s refinancing rate by 0.5 percentage points in both quarter one and quarter two of this year, taking the policy rate to 7% by mid-2023.
On January 5, HSBC said Vietnam’s GDP growth would moderate to 5.8% in 2023 from 8.02% last year, given the external weakness, global economic headwinds, and waning re-opening effects.