Dragon Capital: Outlook positive for Vietnam’s economy

Vietnam’s micro-economy is forecast to see steady growth thanks to appropriate policies introduced to overcome the difficulties posed by Covid-19, analysts told a presentation on the company and Vietnam’s economy held by Dragon Capital Group’s Vietnam Enterprise Investments Limited (VEIL) on April 26.

Impressive economic growth has been seen on the back of consistent pro-market macro policies and the government maintaining the country’s profound political stability. According to VEIL’s calculations, new forces of growth are emerging and infrastructure spending is accelerating. Therefore, Vietnam’s combined drivers will enable a return to 7.5 per cent core GDP growth to 2025. “GDP growth could increase even more if the government gets its activities together with more Covid-19 support programs,” said Mr. Dominic Scriven, Director of VEIL and Co-Founder of Dragon Capital.

In terms of exports, even amid the shutdown, exports last year still increased 19 per cent, with a trade surplus of $4 billion posted. Mr. Scriven believes that Vietnam’s exports are roughly equivalent to or maybe higher than India’s. As FDI inflows continue to arrive, Vietnam’s exports are also forecast to continue to rise and local products will become more diversified. Dragon Capital forecasts that exports will grow 27.5 per cent this year. The trade surplus in the first quarter was $1.5 billion. Vietnam’s net imports of oil and fuel are modest, and partly offset by agricultural exports. Dragon Capital puts Vietnam’s 2022 trade surplus at $10 billion.

With pandemic control underway since the fourth quarter of 2021 and growth momentum regaining steam, 2022 will be a turning point. Manufacturing will take the lead, based on exports, then services as international travel resumes. GDP growth is expected to reach 7 per cent this year, assuming oil prices of $120 a barrel, and may reach 8.6 per cent with the forceful implementation of the country’s stimulus package. According to Mr. Scriven, the economy will also post positive results once its service sector returns as tourism recovers.

FDI into Vietnam will rise strongly this year as factories have reopened and the workforce reaches a level of over 90 per cent. Factories of foreign enterprises in Vietnam, such as Samsung, Apple, Goldstar, Nike, and many others continued to invest in Vietnam throughout the pandemic. According to Mr. Scriven, inflation in 2022 will be controlled and is expected to be 4.2 per cent on average assuming oil prices of $120 a barrel, and Vietnam has also avoided the fiscal and monetary excesses of the US and Europe. Other prices and taxes can be controlled, meaning the government can keep inflation at below 5 per cent this year.