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Overcoming pandemic shocks, maintaining high growth rate, Vietnam is the ‘next Asian miracle’

Vietnam was among the countries gaining the highest GDP growth rates in 2020, which could serve as a launching pad for further growth.

The General Statistics Office (GSO) reported a 2.91 percent GDP growth rate for 2020, a tremendous success in the context of the global economic performance.

 

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The General Statistics Office reported a 2.91 percent GDP growth rate for 2020

 

Prior to that, the World Bank, in its ‘Taking Stock’ report, predicted that Vietnam’s GDP would grow by nearly 3 percent in 2020, while the world’s economy would see a decline of 4 percent.

Vietnam’s GDP growth rate in 2020 was much higher than the 2.3 percent predicted by ADB, or the 2.4 percent predicted by the International Monetary Fund (IMF).

The outlook is brighter for Vietnam in 2021. WB has predicted that Vietnam’s GDP would grow by 6.8 percent in 2021 and 6.5 percent in coming years. ADB has predicted a 6.1 percent growth rate for 2021 and IMF 6.4 percent.

The strong rise of Vietnam’s economy is based on achievements in 2020, including record export turnover, a trade surplus of $19.1 billion, and increased public investments.

Dang Thanh Tam, chair of Kinh Bac Urban Development Corporation (KBC), said Vietnam obtained a positive GDP growth rate in 2020 because it successfully controlled the pandemic. This helped polish Vietnam's image and lure foreign investors.

KBC and its subsidiaries in Q4 2020 alone signed contracts on leasing IZ land with the total area of 150 hectares, worth over $150 million, a good sign for industrial real estate developers.

Most of the projects to be developed on KBC’s land are hi-tech, including ones of well-known corporations in the world.

Prior to that, SSI Research said that the diversifying production globally has been accelerated and Vietnam will benefit from the trend.

Experts believe that when the pandemic subsides, the demand for IZ land will increase sharply from companies that plan to relocate their production bases to Vietnam.

Sources said Apple brought a part of the iPad and Macbook production line to Vietnam last month. Foxconn has announced a new investment deal worth $270 million in Vietnam in order to build the iPad and Macbook production line in Bac Giang, which is expected to become operational in 2021.

 

Sources said Apple brought a part of the iPad and Macbook production line to Vietnam last month. Foxconn has announced a new investment deal worth $270 million in Vietnam in order to build the iPad and Macbook production line in Bac Giang, which is expected to become operational in 2021.

 

Huynh Minh Tuan from Mirae Asset Vietnam said that Vietnam scored success when controlling the pandemic and now needs to clear the way for enterprises to make investments. Simplifying administrative procedures and laying down legal frameworks for new business fields will play an important role in the next development period.

He also suggested that Vietnam attract talent to become a regional finance and manufacturing center. The state needs to apply policies to encourage creativity, because this will increase the added value in export products.

The Financial Times compared Vietnam’s strong economic development and its favorable business environment with Thailand’s foreign investment boom in the 1980s, or China's 20 years ago.

Despite the disadvantages in infrastructure and labor force, many multinationals are seeking to build their production bases in Vietnam.

Le Quang Tri from Tri Viet Securities said the country caught attention from global investors after the pandemic.

But there are still many problems in Vietnam, including poor infrastructure and logistics services. However, the problems could be settled soon if Vietnam continues to maintain an open investment environment.

FDI will continue to flow to Vietnam, especially to the business fields in which Vietnam is still weak. GLP, Asia’s largest logistics group, is developing logistics projects in Hanoi and HCM City, planning to inject $1.5 billion into Vietnam in three years.

According to the Ministry of Planning and Investment (MPI), total FDI capital registered in 2020 was still high, roughly $29 billion, despite Covid-19 which affected investors’ financial resources.

Analysts say that international investors’ confidence in Vietnam is on the rise, which will help Vietnam become one of attractive destinations for foreign investors and help Vietnam join more deeply into the global supply chain.

Carolyn Turk, WB Country Director in Vietnam, commented that with a new strategy for the next stage of development, with a focus on facilitating domestic businesses to integrate into the regional and global markets, innovate and apply digital technology, Vietnam will rise more strongly than ever, if well managed. 

Duy Anh

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