Vietnam's economy is expected to rebound strongly in 2022 and even grow further in 2023, said ADB analysts.
"Despite the difficulties and challenges posed by the pandemic, Vietnam's financial markets remain resilient in 2021 and 2022 owing to a solid economic foundation," Andrew Jeffries, ADB Director in Vietnam, said on Wednesday at the ADB-BIDV forum "Vietnam Financial Markets in 2021 and Outlook for 2022".
According to ADB, the global economic and geopolitical context has become increasingly complex. "Rising costs of goods and services, particularly oil prices, global supply chain disruption, and rapid tightening of wealthy nations' fiscal and monetary policies have exacerbated inflationary pressures. These factors have hampered global economic recovery and raised financial and monetary risks."
In this context, Vietnam's growth momentum has been maintained by macroeconomic stability, the bank stated in a release.
Commercial banks recorded a 39% jump in net profit margins in 2021 compared to 2020. Stock market capitalization grew by 48%, while the insurance industry grew by 19%, compared to a 14% rise in 2020.
"However, risks are emerging in the financial markets. Bad debts are likely to grow rapidly following the expiration of several regulatory policies at the end of 2021. Recent frauds in the corporate bond market indicated shortcomings in corporate governance and regulatory gaps."
Vietnam's financial market in 2022 would benefit from the recovery, but it will also experience several downturns in line with the global trend. Along with government efforts to rectify the market, it is expected to develop more stable, healthy, and sustainable, the bank noted.
"The banking industry's profitability is forecast to increase by 20-25% on average in 2022, with credit growth reaching 14-15%. The stock market is predicted to undergo various adjustments, becoming stable and healthy. VN-Index may rise 8% to 1,610 points in an optimistic scenario or fall 4% to 1,440 points in a negative situation."
The volume of government bond issuance is likely to remain constant due to the lower number of mature government bonds compared to previous years. The corporate bond market is expected to expand in a more transparent, healthier manner as stricter regulations are enacted, coupled with improved management and supervision to reduce risks for participants.
Meanwhile, the insurance sector is forecast to sustain its growth momentum, with premium income climbing by 18-20%, and life insurance serving as the main driver, ADB added.
Prime Minister Pham Minh Chinh on April 22 said that bringing violations to light will help safeguard legitimate investors and keep the bond and stock markets healthy. Chinh was referring to some arrests by the investigative agency for alleged market manipulation and violations of information disclosure.
Previously, Do Thanh Nhan, Chairman of Louis Holdings, and Do Duc Nam, General Director of Tri Viet Securities, were arrested for allegedly manipulating the stock market. On April 14, Dang Nhu Quynh, a well-known Facebook blogger in Hanoi, was detained over accusations of using social media to disseminate "unverified" information that caused harm to the stock market.
Do Anh Dung, Chairman of property developer Tan Hoang Minh Group, was arrested on April 5 by investigative police for "defrauding to appropriate property". On March 29, Trinh Van Quyet, Chairman of developer FLC Group was detained on charges of "manipulating" and "concealing information in securities activities".
ADB predicted that Vietnam's economy would improve in 2022, with growth reaching 5.5-6% and maybe higher in 2023. However, inflation is expected to rise substantially, probably to 3.8-4.2% in 2022 and maintain at 4% in 2023.
World Bank in April lowered Vietnam’s 2022 GDP projection to 5.3% due to challenges in terms of rising Covid-19 infections and the country’s vulnerability to external shocks driven by its high economic openness. This estimation is much lower than that of other international institutions.
Deputy Prime Minister Le Van Thanh on Monday told the ongoing National Assembly session the 6-6.5% economic growth objective and the risk of rising inflation driven by domestic demand recovery have become "significant challenges" for Vietnam.