Consumption in Vietnam

Vietnam - Consumption

Economy rebounds sharply in Q4; 2021 overall GDP growth lowest in at least two decades

GDP expanded 5.2% year-on-year in the fourth quarter of 2021, contrasting the 6.0% contraction recorded in Q3 that had marked the sharpest downturn in the economy since records began in 2000. The Q4 reading marked a rapid rebound following the lifting of most lockdown measures that had inhibited activity in the prior quarter. Nevertheless, this placed total GDP growth for 2021 at 2.6%, down from 2.9% in 2020 and far below the 6.3% average during 2010–2019.

Looking at individual sectors, the rebound in Q4 was broad-based. The services sector grew 5.4% year-on-year, having contracted 8.6% in Q3; the industrial sector expanded 5.6% annually (Q3: -5.5% yoy) and agricultural production growth rose to 3.2% (Q3: +1.2% yoy).

Looking ahead, the economy should grow at a markedly higher pace in 2022 than in the previous year, as restrictions are further eased—prompting a release of pent-up consumer spending and a recovery in tourism—and as strong fiscal spending bolsters activity. However, Covid-19 infection rates still remain relatively high, with the possibility of further outbreaks a key risk given the global spread of the highly-transmissible Omicron variant.

Regarding the outlook, Suan Teck Kin and Peter Chia, economists at United Overseas Bank, commented:

“We lower Vietnam’s growth forecast to 6.8% (from 7.4%) for 2022 against 2.6% in 2021, versus the official projection of 6.0%– 6.5%. It should be noted Vietnam is still in a favourable position to capture upside potential considering the low bases in 2020 and 2021, the strength of its external sectors, as well as the opportunities of the domestic sector adding to this growth momentum.”

Dhiraj Nim and Khoon Goh, economists at ANZ, are slightly more optimistic, stating:

“Overall, our forecast for 2022 GDP growth is at 8%, higher than the market consensus. There is a large degree of uncertainty surrounding our growth forecast. Achieving it is dependent on the strong growth momentum at the end of 2021 carrying over into early 2022, and the absence of further tightening in restrictions as the country moves to an endemic strategy for dealing with Covid-19.”

Our panelists expect GDP to expand 7.3% in 2022, which is up 0.1 percentage points from last month’s forecast, and 6.9% in 2023.