Vietnamese trade balance remains in surplus in early 2022

In a positive sign, all major mobility indicators rose sharply ahead of the Lunar New Year, known locally as Tet, as the country’s vaccination coverage surpassed 73% of the population.

Industrial production continued to record strong growth, though at a slower pace and with a mixed performance across various sub-sectors, while retail sales posted the first positive annual growth rate since the COVID-19 outbreak hit the nation back in late April, 2021.

The country attracted US$2.1 billion of FDI commitments in January, an increase of 4.2% on-year. Growth was driven by large investment in the expansion of existing businesses, particularly in electronics, and through active M&A activities. Indeed, the latter doubled in value in January compared to a year ago, reaching over US$400 million, equivalent to 20% of total FDI commitments.

Manufacturing continued to make up roughly 60% of total commitments, followed by real estates with 22.5%. In addition, the disbursement of approved FDI projects continued to recover from their slump in the third quarter of 2021, thereby increasing by 6.8% on-year in January.

Rising energy prices continued to be the main contributor to CPI inflation, while food prices remained consistently stable as they kept inflation in check.

Credit growth accelerated in January to meet the increased demand from businesses and local households ahead of Tet, causing overnight the interbank interest rate to rise sharply.

In January, a new Economic Recovery Support Program was adopted for the 2022 to 2023 period, with on-budget fiscal measures totaling some 4.5% of revised GDP. The main components of the Program include continued tax and land rent deferrals, a two-percentage-point reduction in VAT rate and additional public investment, while direct cash transfers are limited.

Health measures, such as the vaccination scheme and the “5K message”, should continue as the country opens local schools and plans to lift border restrictions on international visitors to revive the tourism sector. However, the risk of another COVID-19 variant outbreak negatively impacting the economy continues to exist.

According to economists, the new Economic Recovery Support Program could be enhanced through adding further social protection measures which serve to support workers and households affected by the pandemic.

Additionally, in a bid to ensure that the scheme has the intended impact on the economy, its implementation should be monitored closely.