With a tech-led recovery and consistent Foreign Direct Investment (FDI) inflows, Viet Nam’s economy is set to rebound strongly by 8.1% in 2021, according to HSBC’s latest report titled “Asia Economics: It's About Stamina”. HSBC forecasts that Viet Nam’s economy is set to rebound strongly by 8.1% in 2021.
HSBC says that Vietnam is the only ASEAN economy that the bank forecasts having positive growth this year.
HSBC also revised down its GDP growth forecast for Vietnam in 2020, from 3% to 2.6%, as a result of the negative impact of the second wave of the Covid-19 pandemic, which occurred during the summer.
High frequency mobility indicators are now suggesting a strong rebound in economic activity, back to pre-pandemic levels. Moreover, the external sector continues to improve. Exports rose over 7% year-on-year in July and August, thanks to strong growth in computer shipments that have more than offset the weakness in garment products.
To help boost the economy, Viet Nam’s government has so far announced stimulus packages worth VND279 trillion (US$12 billion or 4.4% of GDP), consisting of tax deferrals and direct cash hand-outs to poor households, the report stressed.
Referring to challenges and risks for Vietnam’s economy, HSBC’s report said that headline unemployment rate climbed sharply to 2.7% in the second quarter, with urban jobless rate jumping to its highest level in a decade of 4.5%.
Externally, subdued global demand remains a risk to Vietnam’s manufacturing sector. This is particularly relevant to the country's textiles and footwear industries, where export orders have been hard hit.
HSBC supposed that the second COVID-19 wave in July will likely result in the government adopting a more cautious policy toward opening its borders, thus tourism will likely bear ongoing challenges until there is an effective vaccine.
As a result of the summer outbreak, HSBC downgraded Vietnam’s growth in 2021 from 8.5% to 8.1%. Even with this downgrade, HSBC says that, “Vietnam’s growth rate this year is still quietly ‘skyrocketing’ and will stand out as the fastest-growing economy in the region by 2021.