Consumption in Vietnam

Vietnam - Consumption

Economy records solid growth in Q1

GDP growth clocked in at 4.5% year-on-year in the first quarter of 2021, matching the growth rate from Q4 2020. As such, while Q1's reading marked the joint-strongest expansion since Q4 2019 and is likely to be well above those for other key ASEAN economies, it nevertheless undershot market analysts’ expectations of a near-6% growth rate.

Looking at subsectors, growth in the industrial sector rose to 6.3% in Q1 (Q4: +5.6% yoy), with the manufacturing subsector continuing to play a driving force in overall economic activity. On the other hand, growth in the services sector slowed to 3.3% year-on-year in Q1 (Q4: +4.3% yoy) and agricultural production growth ebbed to 3.2% (Q4: +4.7% yoy).

Looking ahead, the economic recovery should gather pace later in 2021, with Q2’s outturn projected to be significantly higher than in the first quarter of the year. However, still-high infection rates in Europe and the U.S. and associated limitations on international travel cloud the outlook somewhat.

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

“Vietnam’s Q1 GDP print may have partly dampened the optimism regarding its economic recovery in 2021. However, we believe that the economy’s upward growth trajectory remains intact, and even at our revised 7% growth forecast, the recovery will be robust. In fact, the economic climate had started to improve by the end of Q1, and Q2 is likely off to a solid start. However, further Covid-19 outbreaks and the slow vaccination rollout remain the key downside risks to our view. Inflation, on the other hand, is certain to accelerate meaningfully, and will attract greater policy focus this year and the next.”

Our panelists expect GDP to expand 7.4% in 2021, which is unchanged from last month’s forecast, and 6.9% in 2022.