Vietnam: Economy records best result since Q4 2019
GDP growth accelerated to 4.5% year-on-year in the final quarter of 2020, from 2.7% in the third quarter. Q4’s reading marked the strongest growth since Q4 2019 as the economy seemingly continued to emerge from the inhibiting shackles of the Covid-19 pandemic. Nevertheless, this placed total GDP growth for 2020 at 2.9%, the lowest outturn in at least two decades and far below the 6.3% average during 2010–2019.
Regarding the Q4 reading, the improvement was broad-based, with all three tranches of the economy gaining steam from Q3. The services sector expanded 2.3% year-on-year in Q4 (Q3: +1.4% yoy) as the economy benefited from reduced pandemic-related restrictions during the quarter. Meanwhile, the industrial sector rose 4.0% in Q4 (Q3: +3.1% yoy) and agricultural production grew 2.7% (Q3: +2.0% yoy).
Looking ahead, the economic recovery should continue to gather pace in 2021, and Vietnam is likely to continue to outperform its regional peers. However, amid surging infection rates in Europe and the U.S., international travel to Vietnam has been limited at the start of the new year in order to reduce the risk of increasing the relatively low number of domestic cases.
Commenting on the potential impact on tourism in 2021, Tim Leelahaphan, economist at Standard Chartered, noted:
“Vietnam–a major tourist destination globally–is relatively well positioned to restart tourism given its successful handling of Covid-19. That said, the process is likely to be gradual, particularly after the country reported its first local case in almost three months in early December (prompting the prime minister to halt international commercial flights). Resurgent infections in many other parts of the world and ongoing travel restrictions will also delay the tourism recovery.”
Regarding the general outlook for 2021, Goohoon Kwon and Irene Choi, economists at Goldman Sachs, commented:
“In light of the stronger than expected Q4 GDP, we raise our 2021 forecast to 8.2% from 7.7% before. We continue to expect a strong acceleration in growth for the year ahead in 2021, helped by a global rebound from pandemic shocks.”