Vietnam grows 5.03% in Q1, back on track

Vietnam’s export-driven economy expanded 5.03% year-on-year in the first quarter, with signals indicating it is well on track to recovery.

The economy grew 4.72% in Q1 last year and 3.66% in Q1 of 2020, both lower than the figure this year as the economy is rebounding after two years battling with serious Covid-19 fallouts.

The service sector was in strong recovery, while the industrial sector, especially manufacturing, was developing well, Nguyen Thi Huong, chief of the General Statistics Office (GSO) said on Tuesday.

The industrial sector grew 8.36% year-on-year and accounted for 51.08% of the overall growth, while services expanded by 4.58% and made up 43.16%. Agriculture increased 2.45%, contributing 5.76%.

The country’s trade value reached $176.35 billion, up 14.4% percent, of which $88.58 billion came from exports, taking trade surplus to about $810 million.

The U.S. and China continued to play significant roles in Vietnam’s trade landscape as the former was the Southeast Asia country’s largest export market and the latter, its biggest seller. The U.S. accounted for $25.2 billion of Vietnam’s export value, while China earned $27.6 billion from its neighbor’s import spending during January-March.

However, the GSO noted Vietnam would face many difficulties in the second quarter as the export-driven economy has to import lots of goods and services while the world is witnessing a spike in oil prices and material prices. “Beating the year's growth target of 6.5% is challenging,” it noted.

Fitch Ratings in a release on Monday stated that it expects Vietnam’s GDP growth to accelerate to 6.1% in 2022 and 6.3% in 2023 from 2.6% in 2021, led by a recovery in domestic demand, strong exports and high FDI inflows, particularly in the manufacturing sector.

“The economy contracted by 6% year-on-year in Q3 last year on measures to control a surge in Covid-19 cases. Economic activity resumed in Q4 as policy changed to a more flexible approach to the pandemic, made possible by higher vaccination rates; almost the entire adult population of Vietnam is now fully vaccinated,” the release noted.

Fitch Ratings’ forecasts Vietnam’s GDP growth factor in its most recent downward revision to hit 3.5% in 2022 from 4.2%.

“Vietnam’s economic prospects remain susceptible to shifts in external demand due to the economy’s high degree of openness. However, we expect the export sector to continue to perform well into the medium term, benefitting from Vietnam’s cost competitiveness, trade diversion from China and implementation of key trade agreements.”

Meanwhile, VinaCapital, a leading investment fund in Vietnam, in March revised down its country GDP forecast by one percentage point to 6.5%, and raised concerns about a 1-2 percentage-point depreciation in the Vietnamese dong’s value.

Earlier in the same month, the IMF estimated the country’s 2002 economic expansion at 6.6%. In January, the World Bank’s forecast was 5.5%, with an expectation of good pandemic control and a strong recovery in the Vietnamese economy. The WB is yet to have an update, if any, since the Russia-Ukraine war started on February 24.

Before the pandemic began in early 2020, the nation’s annual GDP growth averaged 7%. Vietnam’s economic expansion last year was 2.58%.

In Q1, the consumer price index (CPI) rose only 1.92%, lower than the same period of the years 2017-2020. The government has effectively controlled prices in the market while having put little pressure on supplies, the GSO said, adding that Vietnam would face inflation pressure in the months ahead.