Article assesses Vietnam’s economic prospects, challenges in 2022
An article recently published on the East Asia Forum site assessed prospects and challenges facing the Vietnamese economy this year.
Per the article, 2021 was a tough year as shutdowns made life difficult and GDP slowed to 2.6%. Increasing supplies of vaccines eventually allowed more normal activities in the last few months of the year. Vietnam’s GDP shrank 6% in the third quarter before bouncing back in the fourth quarter.
According to the author, despite factory closures, exports rose 19% in 2021 to an astonishing US$336 billion, while GDP was only US$271 billion in 2020 and grew only slightly in 2021. The high level of foreign direct investment (FDI) did not grow nor shrink much.
The article noted that prospects for Vietnam in 2022 are good. As factories and services approach normal, there will be a jump in output. Most projections are for 6–7% real GDP growth. Tourism should start to recover from its over 95% decline from 2019 levels. Exports should grow about 15% and the trade balance will remain modestly positive. Inflation will remain low and the Vietnam Dong (VND) will continue to appreciate slightly against the US dollar.
The author also pointed out that one side effect of Vietnam’s rapid export growth has been a lag in domestic value-added in exports. Much of the work has been simple assembly rather than the development of a dense network of supplier industries that would make the FDI ‘stickier’ as wages rise and labour supplies tighten. The COVID-19 pandemic slowed progress on this front, as fewer new enterprises opened and many more temporarily closed. Many firms that are still in business are financially weaker and will need time to accumulate resources to improve machinery, training and marketing.