Upticks in manufacturing and exports helped Vietnam’s gross domestic product (GDP) rose 2.62% year over year in the third quarter, accelerating the country’s economic recovery from a slowdown in the first half of 2020 that was caused by the pandemic.
Exports jumped 11% in the third quarter, thanks in large part to a 20% increase in exports of personal computers to meet a growing demand as students worldwide attend online classes and large parts of the global workforce continue to work from home. In September alone, exports jumped 18% compared to the same period last year. Besides China, Vietnam is the only major Asian economy expected to maintain positive growth in 2020.
Vietnam’s management of the coronavirus pandemic within its own borders has helped it reopen and resume economic activity. The Southeast Asian nation had not recorded a locally transmitted COVID-19 case in more than three months when a small outbreak in Danang, a Central beach city popular with local tourists, ended the streak in late July.
Vietnam brought cases down sharply with a swift and strict lockdown of Danang, restricted travel to the city, and widespread, targeted testing and contact tracing. Although Vietnam’s second coronavirus wave stalled the recovery somewhat, the situation is already back under control.
Vietnam’s 2.62% GDP increase in the third quarter represents a significant improvement on the 0.39% year-over-year increase in the second quarter but remains several percentage points below the pre-pandemic third-quarter GDP growth of 7.31% in 2019.
The continued and indefinite loss of foreign tourists because of coronavirus travel restrictions has dented Vietnam’s economic recovery. Before the pandemic, tourism accounted for around 8% of Vietnam’s GDP, according to World Bank.
The loss of foreign tourism is even worse for countries like nearby Thailand, where tourism accounts for 14% of GDP. What’s more, Thailand lacks Vietnam’s status as a manufacturing hub that is recently touted as a supply-chain alternative to China.
Vietnam’s Ministry of Planning and Investment (MPI) also set up two growth scenarios for the fourth quarter, with a baseline scenario at 2.06% and at 2.86% for the positive one.
The MPI’s GDP forecast for this year is not vastly different from that of World Bank in July with 2.8%, making Vietnam the fifth best-growing economy globally, while HSBC also expected the country to reach growth of 2.9%.
The Vietnamese government remains steadfast in ensuring macro-economic stability and focusing on three major growth driving forces, namely investment, export and domestic consumption. The MPI forecast negative impacts from the Covid-19 pandemic to persist for the part or even whole of 2021.
With growing global uncertainties, Vietnam’s major economic partners are predicted to take at least two to four years to return to their pre-Covid-19 levels. However, Vietnam’s GDP growth could rebound to 6.5% in 2021, for which the government is set to continue to look for a rapid and sustainable economic growth rate.
In the first half of 2020, Vietnam’s GDP expanded 1.81% year-on-year, the lowest six-month growth rate in the past 10 years, but is still a spotlight in Asia.