With an expected recovery in the second half of the year, Fenner forecast the country’s GDP to grow 2.3% in 2020, slowing from 7.02% last year, followed by 8% growth in 2021.
But the country remains vulnerable to external developments, particularly those affecting trade, tourism, and FDI, she added.
"Whilst encouraging, we remain cautious in our outlook for momentum, following the initial bounce-back post lockdowns. Indeed, part of the recent rebound in retail sales reflects the release of pent-up demand," said the report.
FDI is expected to pick up in the second half, with Vietnam's labour dynamics and geographical proximity to China ensuring that it remains an attractive destination for investment, particularly in manufacturing.
However, ongoing restrictions on international travel will continue to hinder tourism, with government efforts to promote domestic travel still unlikely to offset the fall in international travel.
And with exports accounting for over 80% of Vietnam's GDP, the pace of recovery will rely on global trade momentum.
One key downside risk is a second wave of the coronavirus and renewed global lockdowns. Under this scenario, Vietnam may only achieve 1.5% growth this year.