Vietnam: Activity gains steam in Q3 on stronger demand at home and abroad
GDP growth accelerated to 2.6% year-on-year in the third quarter, from 0.4% in the second quarter, thanks to the successful containment of the virus domestically and stronger demand abroad. Q3’s reading was likely markedly stronger than those for other key ASEAN economies.
The services sector expanded 2.8% year-on-year in Q3 (Q2: -1.9% yoy), as the economy operated with reduced Covid-19 restrictions during the quarter. In particular, retail trade rebounded as consumers started spending again. However, an outbreak in the city of Da Nang led to some localized measures from late July, which likely dampened growth in the sector. Industrial production rose 3.0% (Q2: +1.7% yoy) amid stronger demand abroad, while agriculture grew 2.9% (Q2: +1.8% yoy).
Looking ahead, the economic recovery should continue to gather pace and Vietnam will continue to outperform its peers. However, momentum will still be held back by shaky activity abroad amid elevated global infection rates, and the risk of another domestic outbreak is a downside risk.
Commenting on the recovery ahead, analysts at UOB noted:
“While the worst of the impact from Covid-19 pandemic looks to be over, it is still a long way before Vietnam’s economy could return to its full capacity. The rebound in both the manufacturing sector and domestic consumption remains weak so far and border closures have reduced tourist arrivals to a trickle. […] we still expect the recovery to extend further in 4Q20 but the pace is likely to be restrained against a backdrop of the ongoing global Covid-19 pandemic.”