Illustrative photo (Source: VNA)Hanoi (VNS/VNA) - Vietnam’s real GDP would grow by 2.6 percent in 2020 andhit an 8.2 percent rebound next year, Fitch Solutions has forecast.
Accordingto a report released on October 1, the UK-based financial informationservices provider said its forecast continued to reflect its view for Vietnam’seconomic recovery to gain steam in the final quarter and into 2021, supportedby manufacturing, construction and services.
“Accordingly,we forecast real GDP to stage a strong rebound to 8.2 percent in 2021, assumingfreer international movement of persons, which would support a tourism reboundand better containment success externally for most of the year, especially inmajor export destinations for Vietnam such as the US and Europe, which wouldsupport external demand,” it said.
“We expectgrowth of the industrial and construction sectors, which accounts for about 35 percentof GDP combined, to only strengthen slightly in the final quarter.”
According tothe General Statistics Office, growth in the industrial sector increasedto 2.3 percent year-on-year (y-o-y) in Q3 2020, from 1.1 percent y-o-y in Q22020, driven by a slight pick-up in manufacturing (17 percent of GDP) growth to3.9 percent y-o-y from 3.4 percent y-o-y, and electricity, gas andwater generation (4.8 percent of GDP) growth to 4.0 percent y-o-y from -0.1 percenty-o-y. The extractive sub-sector extended its contraction to 5.9 percent y-o-yin Q3 from 5.8 percent y-o-y amid a low oil price environment.
Fitchexpects manufacturing growth to strengthen in the final quarter and into 2021although a weak external economic environment could cap gains in this segment.
This isbecause the Vietnamese manufacturing sector is already extremely dependent ontrade, with exports at almost 110 percent of GDP. While China, Vietnam’s secondlargest export destination, appears to be showing promising signs of a V-shapedeconomic recovery following effective containment of its domestic COCID-19outbreak, other large exports destinations such as the US, Japan and theEurozone countries are set to face economic contractions in 2020 with the USand major European countries in particular facing a resurgenceof infections domestically, which clouds Vietnam’s export growthoutlook.
As for theindustrial and construction sectors, which account for about 35 percent ofGDP combined, Fitch expects them to only strengthen slightly in the finalquarter. Growth in the construction sector (5.6 percent of GDP)strengthened to 5.7 percent y-o-y in Q3 2020 from 4.7 percent in Q2 2020.
“We believethat public efforts such as the change in financing methods for threesub-projects under the Eastern North-South expressway project frompublic-private partnerships (PPP) to public investments has accelerated theprogress of these sub-projects.”
Fitchforecast the recovery in services (42 percent of GDP) growth to continue in thefinal quarter and into 2021. The services sector as a whole grew by 2.8 percenty-o-y in Q3 2020, rebounding from -1.9 percent y-o-y in Q2 2020.
This wasmainly due to the lifting of domestic movement and travel restrictions whichallowed for some normalisation of economic activity and domestic tourism tosupport sub-sectors such as retail, hotels and restaurants, transport andwarehousing, with financial services growth rising in line with the generaleconomic recovery.
DespiteFitch’s positivity on the services sector’s recovery prospects, itcontinued to flag that a strong recovery to trend growth of about 7 percentfor the services sector would still be some way off with a shortage ofinternational tourist arrivals. This was as long as international travelremained subject to heavy restrictions as well as Vietnam’s suspension onthe entry of international tourists since March 22 remained in effect to limitthe spread of COVID-19.
Finally,Fitch said growth in the ‘agriculture, forestry andfisheries sector (14 percent of GDP) would remain fairly low andstable so long as cultivation did not experience any major supply shocksfrom bad weather, and thus should not deliver a material change to headlinegrowth./.
VNA
