Vietnamese economic growth likely to reach 6.5% this year

The projection was made by a research team of the National Economics University at a national scientific conference held on April 25 to release the publication themed "Vietnam's economy in 2021 and prospects for 2022: Macro-economic stability and financial soundness amid the COVID-19 pandemic".

Assoc. Prof. Dr. To Trung Thanh, head of the Scientific Management Division under the National University of Economics, said the local economy witnessed unprecedented challenges last year, with its economic growth falling sharply to 2.58%, the lowest recorded over the last two decades, from 2.91% in 2020.

He attributed this drop to the severe recession shock in the third quarter of last year caused by the spread of the Delta variant and the nation’s low vaccination rate at the time.

According to the latest publication, the Vietnamese economy is anticipated to encounter numerous difficulties ahead this year due to new virus strains, escalating global political instability, and a hike in oil prices. These issues have all threatened global recovery, especially major Vietnamese trading partners such as the United States, the EU, and China, thereby affecting trade and investment in the nation.

Furthermore, the governments and central banks of major countries, especially the US, have moved to tighten their monetary policy due to concerns surrounding inflation, which will have an impact on the local economy with monetary policies aimed at supporting economic recovery being narrowed in the future.

Moreover, instability risks still exist due to turmoil occurring in the real estate and securities markets, with credit capital flows not being poured into the production sector, thereby leading to unhealthy indicators in the banking sector.

Thanh anticipates that Vietnamese economic growth is likely to fulfill the target of 6.5% this year, although the Government's inflation target of less than 4% is not achievable.

He duly pointed out that the trend of a hike in the prices of essential goods and gasoline, coupled with the ongoing Russia-Ukraine conflict, have pushed up energy prices to record highs, greatly affecting domestic production costs and exerting great pressure on inflation.

However, Thanh emphasised that the new bailout package of economic recovery could potentially help Vietnamese economic growth reach the target of 6.5% as expected.

The prime driving force behind economic growth is forecast to come from the external economic sector which will make a great contribution to the production of processed products and export items.

Furthermore, the service industry has a chance at strongly recovering this year due to the reopening of the national economy, which will play a crucial role in fulfilling the annual target.

Most notably, growth quality this year is also projected at a higher level, with the total factor productivity (TFP) growth and improved labour productivity.

Experts advised the Government to focus on ensuring sustainable economic development, effectively adjusting fiscal and monetary policies to avoid risks of macroeconomic instability, and providing timely support for local businesses to recover in the post-pandemic period.