Vietnam’s economy picks up, but Covid-19 surge challenges recovery

Recovery trend

Vietnam’s economic growth was on the rise in the first half of this year. Specifically, the country’s index of industrial production (IIP) advanced 8.91 percent, according to the GSO. The processing and manufacturing sector, the main driver of the surge, went up 11.42 percent, contributing 2.9 percentage points to the overall growth. In the second quarter alone, the index of industrial production rose 11.45 percent, nearly double the growth in the first quarter.

The agriculture, forestry and fishery sector increased 3.69 percent, jumping from the 2.42 percent growth in the first six months of 2020.

Foreign trade in goods reached US$316.73 billion, up 32.2 percent year on year, with exports totaling US$157.63 billion (up 28.4 percent) and imports hitting US$159.1 billion (up 36.1 percent).

Already invested capital in the first six months totaled an estimated VND1.17 quadrillion (US$50.87 billion), up 7.2 percent year-on-year, much higher than the three percent increase in 2020.

Foreign capital invested in Vietnam from January to June 20 reached almost US$15.27 billion, down 2.6 percent compared to the same period last year.

Regarding foreign investment by Vietnamese businesses in the first six months, 24 projects were granted investment certificates with a total capital of US$143.8 million from the Vietnamese side, equaling 77.6 percent over the same period last year. Nine projects increased capital by US$403.2 million, a year-on-year increase of 10.8 times.

Total foreign investment by Vietnamese actors (newly-granted and capital expansion projects) reached US$547 million, nearly 2.5 times as much as in the same period last year.

Economist Dr. Vo Tri Thanh says Vietnam’s economy is still facing many challenges, as the Covid-19 pandemic is affecting the country’s largest production centers, including Bac Giang, Bac Ninh, Ho Chi Minh City, Binh Duong, and Dong Nai. Therefore, the country will find it more difficult to reach its 6.5 percent gross domestic product (GDP) growth target for 2021.

Attractive business environment

In the first half of 2021, newly established and re-opened enterprises totaled 93,200, up 6.9 percent year-on-year, while the average registered capital of a newly established business reached more than VND14 billion, up over 24 percent from the same period last year.

The processing and manufacturing industry continues to grow

Vietnam is among the top expansion destinations for companies in the Association of Southeast Asian Nations (ASEAN) looking for growth opportunities in the 10-nation bloc, according to a survey commissioned by Standard Chartered Bank for its “Borderless Business: Intra-ASEAN Corridor” report released on July 8. The majority of ASEAN enterprises focusing on intra-regional opportunities expect robust business growth in the region over the next 12 months, with 99 percent of respondents expecting growth in production and 96 percent anticipating growth in revenue.

Michele Wee, CEO of Standard Chartered Vietnam, said Vietnam continues to offer appealing business and investment opportunities given its strong fundamentals - robust economic growth, a sizeable domestic market, low labor costs, an abundant workforce, free trade agreements, and strategic location.

According to the “Vietnam at a glance - Shining in the year like other” report produced by the Hongkong and Shanghai Banking Corporation Limited (HSBC), despite the pandemic-related challenges, Vietnam has bright prospects for economic recovery, with the economy showing positive signs of improvement.

The World Bank assessed Vietnam and Malaysia have become the driving force of the region’s growth, forecasting that Vietnam would grow 6.6 percent and Malaysia 6 percent in 2021.