ADB maintains 6.5% GDP projection for Vietnam this year
According to Andrew Jeffries, ADB country director for Vietnam, the Vietnamese economy recovered faster than expected in the first half of the year and is now expected to grow amid a challenging global environment.
“The steady recovery was supported by strong economic fundamentals and driven by a faster-than-expected bounce back of manufacturing and services,” said Jeffries.
Presenting the Asian Development Outlook (ADO) Update 2022, Nguyen Minh Cuong, ADB chief economist, noted that the local economy is performing reasonably well amid uncertainties occurring in the global economy. Restored global food supply chains will contribute to boosting agriculture production this year, but high input costs will still constrain the overall recovery of the local agriculture sector.
Softening global demand has greatly slowed manufacturing, with the manufacturing purchasing managers’ index in August recording a slight fall to 52.7 from 54.0 in June. However, the outlook for the manufacturing sector moving forward remains bullish, particularly given the strong foreign direct investment in the sector.
Most notably, fully normalised domestic mobility and the lifting of COVID-19 travel restrictions for foreign visitors will contribute to supporting a robust rebound in tourism moving into the second half of the year, thereby driving the overall growth of the service sector.
Increasing inflation in the United States and the European Union has heightened inflationary pressure in the country. However, Vietnam’s prudent monetary policy and effective price controls, especially with regard to petrol, should keep inflation in check at 3.8% this year and 4.0% in 2023, unchanged from the bank’s projection made in April.
Despite this, the country’s economic outlook continues to face heightened risks, according to the report. The global economic slowdown could negatively impact Vietnam’s exports, while labour shortages are expected to weigh on the fast recovery of the services and labour-intensive export sectors throughout the remainder of the year.
The slow delivery of planned public investment and social spending, especially the implementation of the Government’s Economic Recovery and Development Programme, could greatly slow growth both this year and next, the report says.