Consumption in Vietnam

Vietnam - Consumption

GDP growth dips slightly in Q1

GDP growth eased to 5.0% year-on-year in the first quarter of 2022, slowing slightly from the 5.2% growth clocked in the fourth quarter of last year. The continued relaxing of restrictions helped to bolster activity in the quarter.

Looking at individual sectors, the services sector grew 4.6% annually in the first quarter, decelerating from the fourth quarter's 5.4% increase. Contrastingly, the industrial and construction sectors gained steam, growing 6.4% in Q1 (Q4: +5.6% yoy), and the agricultural sector growth rose to 4.4% in Q1 (Q4 2021: +3.2% yoy).

Looking ahead, the economy should grow at a markedly higher pace in 2022 than in the previous year, as restrictions are further eased—prompting a release of pent-up consumer spending and a recovery in tourism—and as strong fiscal spending bolsters activity. However, Covid-19 infection rates still remain relatively high, with further outbreaks being a key risk given the possible spread of new variants.

Regarding the outlook, Suan Teck Kin and Peter Chia, economists at United Overseas Bank, commented:

“Taking into account Q1 2022 GDP data releases as well as the headwinds ahead, we are keeping Vietnam’s 2022 GDP growth forecast at 6.5% (which was already adjusted down from previous projection of 6.8%). Our forecast is in line with official projection of 6.0–6.5%. While inflationary pressures are building, there is still room for the State Bank of Vietnam (SBV) to keep its policy rates to support the recovery efforts, especially in view of the uncertainty posed by the Russia-Ukraine conflict”

Our panelists expect GDP to expand 6.9% in 2022, which is down 0.1 percentage points from last month’s forecast, and 6.9% in 2023.