Vietnam's Gross Domestic Product and 2022 forecast
While Vietnam was praised globally for managing the COVID19 pandemic in 2020, the Delta variant proved overwhelming causing strict lockdowns, interrupted production, and disrupted supply chains. Although most countries, especially in the west, suffered through a devastating 2020, Vietnam’s 2021 was difficult with the pandemic hitting Vietnam’s GDP significantly. In Q3 2021, Vietnam recorded its first-ever negative GDP since 2000, affecting businesses and people significantly. In 2021, the GDP growth was 2.58 percent.
The General Statistics Office (GSO) released economic figures and cited that Vietnam’s economy in Q1 2022 (January-March) expanded by 5.03 percent compared with the same period as last year. The growth however was down from 5.22 percent in Q4 2021. Nevertheless, the government agency further stated that Vietnam is on track for economic recovery.
Q1’s GDP structure was dominated by services at 41.70 percent followed by, industry and construction and 37.97 percent, and agriculture, forestry, and fishery at 10.94 percent.
Nevertheless, Vietnam still expects a positive GDP and as the government switches to a ‘living with the pandemic’ strategy, further economic gains can be expected. While most banks and international institutions have revised their forecast for Vietnam’s GDP downward, they still maintain strong business sentiment followed by positive GDP growth in the foreseeable future.
For 2022, Vietnam’s government has forecast GDP growth of 5.5 – 6 percent.
Foreign Direct Investment trends
Foreign direct investment into Vietnam dropped 1.2 percent from a year earlier to USD 19.74 billion in 2021. However, the Foreign Investment Agency in Vietnam reported that the total FDI pledges i.e., new, adjusted capital and share purchases by foreign investors, reached 31.15 billion USD in December 2021. Further, approximately 1700 projects received investment licenses with a total registered capital of over US$ 15.2 billion, a volume decrease of 31.1 percent YoY, however up 4.1 percent in value YoY.
As with previous years, manufacturing and processing led with total investment capital of US$18.1 billion and accounted for 58.2 percent of total registered investment capital. While electricity production and distribution attracted a small number of new projects, they were large-scale, and thus ranked second with an investment capital of US$5.7 billion and accounting for 18.3 percent of total registered investment capital. This was followed by real estate and wholesale and retail at US$2.6 billion and US$1.4 billion respectively.
FDI disbursement in Q1 2022 stood at US$4.42 billion, an increase of 7.8 percent compared with the same period last year. As with previous trends, Singapore led the list followed by South Korea, Denmark, and China. In addition, Binh Duong province led the list with total registered investment capital. This is due to the Lego Group project by Danish investors in Binh Duong estimated at US$1.3 billion.
While the country has been attracting FDI in virtually all sectors the government is pushing for investment in high-tech and digital economy sectors. In addition, the government has also launched incentives to help businesses affected by the pandemic. These include tax breaks, delayed tax payments, land fee rentals, and support policies for employers and employees.
Vietnam's Trade Trends
As we saw, demand for electronics such as computers and mobile phones skyrocketed during the pandemic helping Vietnam’s exports. The US imported smartphones and accessories from Vietnam worth around US$ 96.2 billion rising by 10 percent year on year. The US was also Vietnam’s largest importer of computers and electronic products with a value of US$ 12.7 billion. Apart from this, the US imported machinery and equipment and took the lead in apparel imports from Vietnam at US$16.1 billion contributing to Vietnam’s GDP.
In line with Vietnam’s vision to move from a low-cost manufacturing destination to a high-value manufacturer - shipments of raw materials decreased, while the exports of processed and industrial products increased.
Vietnam’s active engagement in FTAs with China, US, EU, ASEAN, South Korea, India, New Zealand, and Australia as well as trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Vietnam-EU Free Trade Agreement (EVFTA), propelled the country’s exports to new levels.
The country’s total imports were valued at VND 7679531.00 billion (US $331 billion) in 2021 with the main categories of import being - computers, electrical products, and parts, as well as machine, instruments, and accessories. Other imports include telephones, mobile phones and parts, textile fabrics, as well as iron and steel.
The total import and export turnover reached a record of US$668.5 billion. In addition, the credit market and exchange rates were stable.