A corner of Ho Chi Minh City (Photo: VNA)Hanoi (VNA) – Vietnam’s economy is forecastto grow beyond expectation in 2022 as domesticdemand rebounds and foreign direct investment (FDI) inflows remains stable.
Most forecasts by foreign investment funds show that Vietnam’s GDP growth islikely to increase by 7.5 percent in 2022.
However, it is not too surprising if the economy will grow at a higher ratethanks to strong recovery of domestic consumption, construction activities,international tourism, as well as the Government's financial stimulus packageworth 15 billion USD, according to insiders.
The re-opening of domestic economy will be the biggest driver of economicgrowth this year. The stimulus package, including cutting value-added tax from10 percent to 8 percent, promises to boost domestic consumption.
According to Michael Kokalari, Chief Economist of VinaCapital, Vietnam'shousehold consumption is likely to recover from a decline of 6 percent in 2021to an increase of 5 percent in 2022.
Domesticconsumption will be pushed by the recovery of international tourism, whichaccounted for about 8 percent of the country's GDP before the pandemic, he said.
Recent surveys in the US and some other countries indicate that demand totravel to Vietnam has sharply increased. Therefore, the partial recovery ofinternational tourism is expected to help Vietnam's GDP rise by at least 3percent this year, and further in 2023 when Chinese tourists return to theVietnamese market.
Meanwhile, the construction growth which accounts for about 6 percent of thecountry's GDP is projected to increase to 10 percent in 2022 from only 0.6 percentin 2021, equivalent to the pre-pandemic average growth, Kokalari said.
The Vietnam Manufacturing Purchasing Managers' Index (PMI) was up in January thanks to the record increase in orders from foreign customers in more than four years. (Photo: VNA)The manufacturing sector, which makes up over 20 percent of and plays animportant role in supporting Vietnam's economy during the pandemic, is forecastto contribute less this year. However, the Vietnam Manufacturing Purchasing Managers' Index (PMI) was up in January thanks to the record increase in orders fromforeign customers in more than four years.
FDI firms also increased imports of necessary materials to fulfill orders.Therefore, the manufacturing sector is likely to grow stronger than expected thisyear.
The long-term growth outlook for the production industry still remains strongand continues to be supported by FDI inflows, Kokalari said.
He noted that despite the COVID-19 pandemic, Vietnam has been still anattractive destination to FDI inflows during the last two years.
According to data from theUnited Nations, FDI to Vietnam decreased by 3 percent in the pasttwo years, but it decreased by over 40 percent globally in 2020 alone.
According to an agreement reached recently between the US Department of Financeand the State Bank of Vietnam, the US will not impose tariffs on Vietnameseexports to this market. This, together Vietnam's rapid vaccination campaign, islikely to help attract stronger FDI inflows to the Southeast Asian nation inthe near future.
In addition, LEGO Group of Denmark, which is known for its commitment tosustainability, will build the company's first carbon neutral factory in Vietnam.This investment will contribute to affirming Vietnam's ESG (environment, social and governance) values and attracting more foreign manufacturers whoare prioritising sustainable development.
According to Kokalari, foreign investors are not too worried about inflation.Although this inflation rate is skyrocketing in many countries around theworld, including the US, with over 7 percent, it has not been recorded in mostdeveloping countries in Asia, including Vietnam./.
