Vietnam’s economy seen to grow 5.5% this year in case pandemic subsides
Vietnam’s economic recovery is likely to accelerate in 2022 as gross domestic product (GDP) growth is expected to rise to 5.5 per cent from 2.6 per cent in the previous year, the World Bank said in a new economic update for the country.
Under the assumption that the Covid-19 pandemic will be brought under control at home and globally at some point of time given the milder Omicron variant, the forecast envisions that particularly Vietnam’s services sector will gradually recover as consumer and investor confidence is expected to strengthen.
The manufacturing sector, in turn, will benefit from steady demand from the US, the European Union and China. Fiscal deficit and debt are expected to remain sustainable, with the debt-to-GDP ratio projected at 58.8 per cent, well below the statutory limit, the report said.
Improvement of environmental issues in trade paramount
The World Bank’s forecast also touches environmental issues. While Vietnam has started to decarbonise activities associated with trade, more needs to be done to respond to mounting pressures from main destination markets, trade partners and multinational companies for greener products and services, it noted.
“Trade will be key component of Vietnam’s climate actions in the years to come,” Carolyn Turk, the World Bank’s country director for Vietnam, said.
“Promoting greener trade will not only help Vietnam follow through on its pledge to reach net zero emission in 2050 but will also help it keep its competitive edge in international markets and ensure trade remains a critical income and job generator,” she added.
Looking into potential downside risks if Covid-19 crisis persists
The outlook, however, also takes into account potential downside risks, particularly the unknown course of the pandemic. Outbreaks of new variants may prompt renewed social distancing measures and dampen economic activity, while weaker-than-expected domestic demand in Vietnam could also weigh on the recovery.
In addition, a growing number of export destinations are facing dwindling fiscal and monetary space, potentially restricting their ability to further support their economies if the crisis persists, which in turn could slow the global recovery and weaken demand for Vietnamese exports.
Fiscal policy and social measures in focus
World Bank economists said careful policy responses could mitigate these risks within Vietnam. Fiscal policy measures, including temporary reduction of the value added tax rate and more spending on health and education, could support aggregate domestic demand, they noted.
In addition, support for affected businesses and citizens should be more substantial and more narrowly targeted in case the crisis persists. This should include social protection programs to address the severe and uneven social consequences of the pandemic. Heightened risks in the financial sector should be also closely monitored and addressed proactively, they added.
[caption id="attachment_38089" align="alignleft" width="300"] A Covid-19 billboard in Hanoi[/caption] Vietnam’s economic recovery is likely to accelerate in 2022 as gross domestic product (GDP) growth is expected to rise to 5.5 per cent from 2.6 per cent in the previous year, the World Bank said in a new economic update for the country. Under the assumption that the Covid-19 pandemic will be brought under control at home and globally at some point of time given the milder Omicron variant, the forecast envisions that particularly Vietnam’s services sector will gradually recover as consumer and investor confidence is expected to strengthen. The manufacturing...
Vietnam’s economic recovery is likely to accelerate in 2022 as gross domestic product (GDP) growth is expected to rise to 5.5 per cent from 2.6 per cent in the previous year, the World Bank said in a new economic update for the country.
Under the assumption that the Covid-19 pandemic will be brought under control at home and globally at some point of time given the milder Omicron variant, the forecast envisions that particularly Vietnam’s services sector will gradually recover as consumer and investor confidence is expected to strengthen.
The manufacturing sector, in turn, will benefit from steady demand from the US, the European Union and China. Fiscal deficit and debt are expected to remain sustainable, with the debt-to-GDP ratio projected at 58.8 per cent, well below the statutory limit, the report said.
Improvement of environmental issues in trade paramount
The World Bank’s forecast also touches environmental issues. While Vietnam has started to decarbonise activities associated with trade, more needs to be done to respond to mounting pressures from main destination markets, trade partners and multinational companies for greener products and services, it noted.
“Trade will be key component of Vietnam’s climate actions in the years to come,” Carolyn Turk, the World Bank’s country director for Vietnam, said.
“Promoting greener trade will not only help Vietnam follow through on its pledge to reach net zero emission in 2050 but will also help it keep its competitive edge in international markets and ensure trade remains a critical income and job generator,” she added.
Looking into potential downside risks if Covid-19 crisis persists
The outlook, however, also takes into account potential downside risks, particularly the unknown course of the pandemic. Outbreaks of new variants may prompt renewed social distancing measures and dampen economic activity, while weaker-than-expected domestic demand in Vietnam could also weigh on the recovery.
In addition, a growing number of export destinations are facing dwindling fiscal and monetary space, potentially restricting their ability to further support their economies if the crisis persists, which in turn could slow the global recovery and weaken demand for Vietnamese exports.
Fiscal policy and social measures in focus
World Bank economists said careful policy responses could mitigate these risks within Vietnam. Fiscal policy measures, including temporary reduction of the value added tax rate and more spending on health and education, could support aggregate domestic demand, they noted.
In addition, support for affected businesses and citizens should be more substantial and more narrowly targeted in case the crisis persists. This should include social protection programs to address the severe and uneven social consequences of the pandemic. Heightened risks in the financial sector should be also closely monitored and addressed proactively, they added.
