Consumption in Vietnam

Vietnam - Consumption

Economic growth accelerates in Q2

GDP growth clocked in at 6.6% year-on-year in the second quarter of 2021, accelerating from the 4.7% growth recorded in Q1. While the reading marked the strongest expansion since Q4 2019, it both undershot market analysts’ expectations of an above-7% growth rate and is likely to compare unfavorably with those of other key ASEAN economies, which likely recorded rapid annual growth in Q2 amid low base effects.

Looking at subsectors, growth in the industrial sector rose to 10.3% in Q2 (Q1: +6.3% yoy), with the manufacturing subsector continuing to play a driving force in overall economic activity. Moreover, growth in the services sector increased to 4.3% year-on-year in Q2 (Q1: +3.6% yoy) and agricultural production growth rose to 4.1% (Q1: +3.5% yoy).

Looking ahead, the economic recovery should continue at a strong pace in the third quarter of the year. Robust foreign demand should continue providing fuel for the manufacturing sector to act as the engine of economic growth, although rising daily Covid-19 infections and a tightening of pandemic-related restrictions at the outset of the quarter will likely temper activity somewhat in the coming months.

Regarding the outlook, Dhiraj Nim and Khoon Goh, economists at ANZ, commented:

“We remain constructive on Vietnam as far as its regional standing goes. Amid a broader resurgence of the pandemic in Asia, Vietnam’s growth prospects still look better in a relative sense. After averting contraction in 2020, its expected pace of recovery in 2021 implies that it will be among one of the first economies to narrow, or even close, its negative output gap in the region. In addition, the medium-term prospects are solid, amid expectations of rising exports and foreign direct investment.”

Our panelists expect GDP to expand 6.9% in 2021, which is down 0.1 percentage points from last month’s forecast, and 6.8% in 2022.