Vietnam: Growth slumps in the first quarter
The economy grew 3.8% in the first quarter of 2020, down sharply from 7.0% growth in Q4 2019.
The first quarter’s reading was driven by marked slowdowns in services and industry, which expanded a mere 3.3% and 5.3% respectively. The services sector suffered from soft retail sales and a slump in visitor arrivals due to widespread travel restrictions. Moreover, the industrial sector was dragged on by slower manufacturing growth and a contraction in mining on lower oil and gas output. The agricultural, forestry and fishing sector broadly flatlined in Q1.
Looking ahead, activity should stay muted in the near term, as Vietnam’s highly open economy suffers from weak external demand. Moreover, social distancing measures will affect domestic activity. However, fiscal and monetary support should cushion the economy somewhat.
Regarding the outlook for the external sector, analysts at ING comment: “Even before Covid-19 led to country-wide lockdowns, supply chain shocks and weak foreign demand were already taking a toll. Small open economies, such as […] Vietnam now look to be the most vulnerable.”