|A worker operates a yarn processing line at Best Pacific Vietnam Co. Ltd at the Vietnam-Singapore Industrial Park (VSIP) in the northern province of Hai Duong. (Source: VNA)
Vietnam has now integrated more deeply into the global economy thanks to the strong development of its manufacturing sector, said economist Chidu Narayanan at Standard Chartered Bank. The country has one of the most open economies in Asia, with a trade-to-GDP ratio surging to 300%, so it heavily depends on global demand, he explained.
Given that the US and European economies are slipping into recession, weakening global demand will affect Vietnam’s economic growth in 2020.
In the economic outlook for the second quarter entitled “Darkest before the dawn”, the bank said the manufacturing sector, which accounts for one-third of the country’s GDP, is expected to grow only 3% this year compared to 11% in 2019.
The sector’s contribution to GDP growth is predicted to fall 1.6 percentage points from a year earlier.
Growth in the service sector, meanwhile, which contributes nearly 40% of GDP, is expected to slow down to an estimated 4%, compared to 7.3% last year. Its contribution to GDP growth will likely to fall 1 percentage point.
The bank also said the number of visitors to Vietnam will be down by 60% this year and FDI inflows will be below US$10 billion or lower if concerns over the COVID-19 pandemic linger into the second half.
Vietnam’s GDP grew 3.82% in the first quarter - the lowest rate posted for a decade - due to impact of the pandemic.