Illustrative image (Source: VNA)In a report released on October 4, DBS economist Chua Han Teng held that for Vietnam, theworst is over and the country’s economy will recover again when it reopens thedoor thanks to higher vaccination rate and lower number of new infections.
According to thereport, foreign direct investments (FDI) will remain a key engine of Vietnam’sgrowth over the coming years. Newly registered FDI remained resilient in thefirst three quarters of 2021, despite the challenges and difficulties faced byinternational companies during the virus outbreak since April 2021.
It noted that Vietnamhas suffered heavily from the pandemic in 2021. Having done well with virusmanagement in 2020, the economy shrank significantly in the third quarter of2021 by 6.17 percent year on year.
It held that themulti-decade decline in the third quarter makes it difficult for growth torecapture last year’s 2.9 percent expansion, much less the government’sofficial GDP target range of 6-6.5 percent. Therefore, the DBS lowered its 2021growth forecast to 1.8 percent from 5 percent previously. With demand-pullpressures also muted through 2021, CPI inflation is likely to average lower at2.1 percent from 3.3 percent previously.
“Looking into thefourth quarter of 2021 and 2022, we expect a better outlook, as the economyenters a ‘new normal’, helped by the vaccination roll out. Favourable baseeffects and structural growth drivers such as FDI and exports, coupled withdigitalisation impetus, are likely to propel growth to 8 percent in 2022 (vs6.8 percent previously)”, it said.
“We expect retailand recreation mobility to improve further amid looser curbs and greateradaptation towards ‘living with the virus’. Retail sales and ‘accommodation andfood services’, which saw significant double-digit contractions in the third quarter,are therefore likely to concomitantly rebound and recover into 2022,” statedChua.
The report alsohighlighted Vietnam’s increasing digitalisation in the ‘new normal’ situation.
The pandemic hasnotably accelerated digitalisation and increased technological adoption, whichis a constructive trend, it said.
The report quoted theGoogle, Temasek and Bain, e-Conomy SEA 2020 report as saying that increasedusage of digital solutions is also reflected in a high share of new digitalservice consumers in Vietnam, arising from COVID-19 restrictions that preventedvisits to physical stores.
Chua held that greaterattainment of technical and digital skills, and a higher-skilled workforce overthe coming years should not only help to increase productivity but also providea positive feed-back loop to enable Vietnam to move up the manufacturing valuechain and further attracting FDI.
Last year, the valueof the cloud computing market of Vietnam was estimated at over 130 million USD.The figure is forecast to hit 500 million USD in 2025./.
VNA
