Vietnam’s economic growth driven by good recovery of sectors: WB

Vietnam's GDP grows by 5.0 percent year-on-year in Q1-2022 (Photo: VNA)

Hanoi (VNA) – Vietnam’s economic growth in the first quarter of 2022was consolidated thanks to the solid performance of export-oriented manufacturingand recovering service sector, according to the Vietnam Macro Monitoring reportrecently released by World Bank.

The country’s GDP grew by 5.0 percent year-on-year inQ1-2022, comparable to the growth rate in Q4-2021, yet still two percentagepoints below pre-pandemic rates.

Industry and construction and services sectors grew 6.4percent year-on-year and 4.6 percent year-on-year, respectively, contributing4.3 percentage points to quarterly GDP growth. Growth of industry and constructionwas driven by strong external demand for manufactured products, while servicessector performance varied across sub-sector. Finance, banking and insurance,and information and telecommunications have been exceptionally resilient over the past two years and maintained solidgrowth. On the other hand, accommodation and catering services were 1.8 percentlower than a year ago, and well below their pre-pandemic level, thereport pointed out.

Industrial production index grew by 8.5 percent year-on-yearin March, comparable to pre-pandemic rates, while retail sales growthaccelerated from 4.1 percent in February to 9.4 percent, the second-highest growthrate since the onset of the COVID-19 pandemic. This rebound is partly due to thepost-pandemic resumption of economic activities and was driven by a 10.7percent growth in the sales of goods.

The merchandise trade balance posted a surplus of 1.4billion USD in March, while registered and disbursed foreign direct investment(FDI) remained stable amid global uncertainties related to the Russia-Ukraineconflict.

The Consumer Price Index (CPI) increased by 2.4 percent(y/y) in March, compared to 1.4 percent in February. This is the highest inflationrate in seven months but remains well below the 4.0 percent target.

Illustrative image (Photo: VNA)

According to the World Bank, rising consumer and producerprices warrant close monitoring of domestic price developments as rising inflationwould affect the recovery of domestic consumption and economic growth. WhileCPI increases have been subdued in 2021 due partly to slack in aggregate demand,accumulated increases in intermediate and producer price index in the last threequarters could impact production decisions and translate into higher consumerprices, especially food prices.

In the short run, the bank said, targeted policyintervention to alleviate the impact of the price hikes on the general population,and especially on the most vulnerable is recommended. The temporary petroleum tax reduction recently introduced by the authorities is one such short termmeasure.In the medium term, other measures would include a more targeted, effective,and responsive social protection system that would help build resilience toshocks in the economy. If price increases persist, the economy should beallowed to adjust to the price changes.

The authorities should consider structural reforms to helpthe economy become more productive and increase aggregate supply. These wouldinclude tax breaks for productive and innovative investments, reducing barriersto doing business and logistics costs and investing in the educationand technical training of the work force, said World Bank./.

VNA