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Vietnam's economy on significant recovery despite global inflation

Vietnam's economy on significant recovery despite global inflation

Monday 19, 09 2022
In the Vietnam macroeconomic update report for September 2022, the World Bank (WB) assessed that Vietnam's economy has continued to recover despite high global inflation as well as slower economic growth in major trading partner countries.

Impressive growth indexes

Experts from World Bank said that industrial production, which is one of the main drivers of the economy, continued to show a recovery momentum.

Specifically, industrial production and retail sales recorded high growth rates of 15.6% and 50.2% over the same period last year.

dynamic economic sectors

The most dynamic economic sectors include electronics (up 12% month-on-month) and transportation (up 15.7% month-on-month). The Purchasing Managers' Index (PMI) rose from 51.2% in July to 52.7% in August, recording 11 months of continuous growth in the manufacturing and processing industry.

Retail sales continued to recover. In particular, sales of consumer services tripled compared to the same period last year and increased by 3.5% compared to pre-pandemic period.

Sales of accommodation and catering services increased by nearly 185.3%, contributing about 50% to the growth in sales of consumer services. Travel services have also been on the rise, reaching near pre-pandemic levels. Sales of goods still maintained a good growth rate of 31.9% over the same period last year.

In addition, the trade balance of goods recorded a surplus of USD 2.4 billion in August. To be more specific, export growth in August was recorded at 22.5% compared to 9.8% in July ( over the same period last year), while import growth reached 13.3%.

Foreign direct investment

Regarding foreign direct investment (FDI), although the registered capital slowed down, the realized capital continued to be positive. Accordingly, the amount of FDI disbursements in August increased by 13.9% over the same period last year, recording a continuous upward trend in 9 months.

Meanwhile, CPI eased slightly from 3.1% in July (year-on-year) to 2.9% in August thanks to cooling fuel prices.

In addition, credit growth remained at a high level, 16.2% (compared to the same period last year), while the interbank overnight interest rate (end of period) increased from 0.71% in June to 4.19% in July and 4.42% in August.

This is partly due to the imbalance in domestic deposits. While deposit interest rates have been maintained at a low level, the demand for domestic credit increased, causing banks to compete for capital in the interbank market.

Also according to the WB, the State budget recorded a bumper profit for 8 consecutive months. The government does not borrow much in the domestic market, when the volume of issuance of government bonds and government-guaranteed bonds only reached 27.4% of the plan in the first eight months of the year, which  is less than half of the volume in the same period last year.

State budget

"The economic recovery continues despite increasing uncertainties related to higher global inflation and slower economic growth in key trading partner countries." , WB assessment.

Inflation risks

However, the World Bank believes that Vietnam needs to be cautious with inflation risks related to food prices and basic commodities. At the same time, although fuel prices have cooled recently, global fuel price volatility is unpredictable.

Therefore, the World Bank’s experts recommend that it is necessary to produce and use alternative energy as a way to reduce the dependence of the economy on imported fuels and promote green growth.

In addition, the social assistance system should be strengthened, including the registration, selection and disbursement system, to facilitate access to affected people during shocks," the report noted.

Source: World Bank, vietnamfinance

Compiled by VietnamCredit


Vietnam Economy

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