A post-pandemic recovery is underway in Vietnam and high-frequency indicators point to stronger momentum going into 2022, with rising retail sales, industrial production, and firm entry, says the International Monetary Fund.
Growth is expected to reach 6% in 2022 as activity normalisation continues and the country's Program for Recovery and Development (PRD) is implemented, according to a conclusion the institution’s executive board issued in Washington Tuesday after their latest consultation with Vietnam.
“While inflation has recently picked up, due to rising commodity prices and supply-chain disruptions, it remains well below the central bank’s inflation ceiling, given economic slack and relatively stable food and administered prices.”
The conclusion added, “Fiscal policy is expected to remain supportive, especially via the deployment of the PRD. Monetary policy is expected to remain vigilant to inflationary risks. Risks associated with problem loans, real estate, and corporate bond markets should be closely monitored, and macroprudential frameworks strengthened.”
IMF directors commended Vietnamese authorities for adopting policies to cushion the impact of the pandemic while successfully maintaining fiscal, external, and financial stability, as well as for the impressive vaccination rollout.
However, Vietnam’s strong economic recovery remains "uneven, with the labor market lagging, rising financial sector vulnerabilities, and longstanding structural challenges". Noting that risks are to the downside, they called for agile policymaking, proactively adjusted to the pace of the recovery and evolution of risks.
The directors underscored the need for fiscal policy to take the lead and be flexibly adjusted to evolving economic conditions. They suggested a gradual fiscal adjustment when the recovery becomes more entrenched, with the focus on revenue mobilization to create space for spending on social, climate, and other development objectives.
Vietnam posted GDP growth of 7.72% in the second quarter of this year, driven by strong export growth; and the first half’s expansion was 6.42%, higher than the 5.1-5.7% target.
Growth higher than pre-pandemic levels was recorded in sectors like processing, manufacturing, goods retail, consumer services, and exports. CPI in the first six months rose 2.44% on average against the same period last year.
Vietnam licensed 76,233 new firms and recorded 40,667 rejoining the market in the first half of the year, or 116,900 in total, a record high.
It aimed to achieve economic expansion of 7% this year, higher than the previously-set target of 6-6.5%, Minister of Planning and Investment Nguyen Chi Dung told a government meeting last Monday.
The World Bank on June 7 raised Vietnam’s GDP prediction this year to 5.8% from 5.3% in its April forecast. Credit rating agency S&P Global Ratings in late May revised up the country’s long-term sovereign credit rating to BB+, a "stable" outlook.