According to an article posted recently, the optimism is based on the strong economic foundation built over a decade of steady GDP growth averaging 6 percent annually until 2019. Despite the pandemic setbacks in the last two years, new threats and inflation, the outlook is positive, experts said. 

The World Bank predicts Vietnam’s economy to grow at 5.5 percent in 2022 while the IMF projects a higher 6.6 percent, up from 2.6 percent in 2021.

At a factory in Vietnam

Speaking to AsianInvestor, VCG Partners chief executive Jason Ng projected that Vietnam’s GDP may grow by more than 7 percent this year with the rebound in consumption, the expectation for a full reopening of the country to foreign tourists and the recently approved stimulus aid package.

VCG is the Singapore subsidiary of VinaCapital, one of Vietnam’s leading investment management firms.

The Vietnamese Government approved a stimulus package of USD 15.3 billion to help pandemic-hit local businesses and workers.

The article continued that one of the key economic drivers is industrialization, powered by foreign direct investments (FDI) which have not slowed down significantly despite the pandemic disruptions.

About USD 15.8 billion of foreign capital flowed into the country in 2020, down slightly from USD 16.1 billion in the previous year, according to the World Bank. The official figure for 2021 is expected to be in the same ballpark, given that investors are attracted to Vietnam’s low-cost labor, young and educated workforce, stable currency, and generous corporate tax incentives.

Vietnam has signed a plethora of free trade agreements with the U.S., the European Union, China, Japan, the Republic of Korea, and ASEAN, which has enhanced its position as a manufacturing and export hub, the article underlined.

Another key driver is the rise in domestic consumption. The surge of foreign investments in recent years has created jobs and a vibrant middle class, as well as nurtured many local small and medium business owners who have become suppliers to the big manufacturers. 

The emergence of the middle class – those earning USD 700 a month – will boost domestic consumption.

“The young middle class is digitally savvy, so e-commerce and the supporting distribution and logistics sectors are expected to benefit from it,” Ng said, adding that financial services, residential property, digital technology, and green products are potential investment opportunities.

The biggest current risks for foreign investors is the resurgence of inflation and the possible depreciation of the Vietnamese Dong against the U.S. dollar.

Still, Vietnam, which has foreign reserves of more than USD 100 billion and a healthy trade surplus, would be able to hold up, the expert said.

Source: VNA