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Economy Finance and Trade Vietnam

Economy Finance and Trade Vietnam

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0% found this document useful (0 votes)
91 views22 pages

Economy Finance and Trade Vietnam

Economy Finance and Trade Vietnam

Uploaded by

quang tran
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 22

Economy, Finance and Trade:

Vietnam
Euromonitor International
May 2023
ECONOMY, FINANCE AND TRADE: VIETNAM Passport i

LIST OF CONTENTS AND TABLES


HEADLINES ................................................................................................................................. 1
PROSPECTS ............................................................................................................................... 1
Strong exports support GDP growth in Vietnam ....................................................................... 1
Vietnam avoids rocketing inflation rates ................................................................................... 1
Reopening of Chinese economy expected to boost trade ........................................................ 2
Multinational tech companies invest in Vietnam ....................................................................... 2
Vietnam's fiscal outlook remains uncertain due to rising debt and inflation .............................. 2
COUNTRY RISK ANALYSIS ........................................................................................................ 3
ECONOMIC LANDSCAPE ........................................................................................................... 3
Chart 1 Economic Landscape of Vietnam 2022-2027 ............................................... 3
Chart 2 Real GDP Growth in Vietnam 2010-2027..................................................... 3
Chart 3 GDP Size and Growth 2017-2027 ................................................................ 4
Chart 4 Gross Value Added by Sector in Vietnam 2022 ........................................... 4
Chart 5 Domestic Demand 2022 and Period Growth 2017-2022 .............................. 5
Chart 6 Productivity 2017/2022 ................................................................................. 5
Chart 7 Productivity by Sector in Vietnam 2022 and CAGR 2017-2022 ................... 5
MONETARY INDICATORS .......................................................................................................... 6
Chart 8 Monetary Landscape of Vietnam 2022 ......................................................... 6
Chart 9 Inflation 2017-2027....................................................................................... 6
Chart 10 Average Inflation 2017-2027 ........................................................................ 7
Chart 11 Interest Rates in Vietnam 2017-2024 ........................................................... 7
Chart 12 Exchange Rates 2017-2024 ......................................................................... 8
Chart 13 Money Supply Growth and Money Velocity in Vietnam 2017-2024 .............. 8
FOREIGN TRADE ........................................................................................................................ 9
Chart 14 Foreign Trade Landscape of Vietnam 2022 ................................................. 9
Chart 15 Exports and Export Price Index in Vietnam 2017-2022 ................................ 9
Chart 16 Exports by Commodity in Vietnam 2022 .................................................... 10
Chart 17 Top 10 Export Destinations 2022 and Period Growth 2017-2022 .............. 10
Chart 18 Imports and Import Price Index in Vietnam 2017-2022 .............................. 11
Chart 19 Imports by Commodity in Vietnam 2022..................................................... 11
Chart 20 Top 10 Import Origins 2022 and Period Growth 2017-2022 ....................... 12
INVESTMENTS .......................................................................................................................... 12
Chart 21 Investment Landscape of Vietnam 2021-2022 ........................................... 12
Chart 22 Foreign Direct Investment Inflows and FDI intensity 2021 ......................... 13
Chart 23 Foreign Direct Investment Inflows and Outflows in Vietnam 2016-
2021 ........................................................................................................... 13
Chart 24 Gross Fixed Capital Formation in Vietnam 2017-2022 ............................... 14
GOVERNMENT FINANCE ......................................................................................................... 14
Chart 25 Government Budget Landscape of Vietnam 2022 ...................................... 14
Chart 26 Public Debt 2022 ........................................................................................ 15
Chart 27 Government Revenue 2022 ....................................................................... 15
Chart 28 Government Expenditure 2022 .................................................................. 16
Chart 29 Government Expenditure by Economic Type in Vietnam 2022 .................. 17
Chart 30 Government Expenditure by Function in Vietnam 2022 and Period
Growth 2017-2022 ..................................................................................... 17

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport ii

FORECAST RISKS .................................................................................................................... 18


Chart 31 Baseline and Scenario Forecasts in Vietnam 2020-2026 ........................... 18

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 1

ECONOMY, FINANCE AND TRADE:


VIETNAM
Vietnam's GDP grew in 2022, driven by elevated private spending, strong exports, foreign
direct investment, and gross fixed capital formation. The manufacturing industry remained the
largest contributor to the economy. The country's economy is forecast to continue growing;
however, inflation is expected to witness an upward trend. Meanwhile, rising debt pose
significant challenges to policymakers, calling for prudence in managing debt and conducting
fiscal policy.

HEADLINES
▪ Following real growth of 8.1% in 2022, Vietnam’s economy is expected to expand at an
average annual real rate of 6.1% over 2022-2027
▪ Inflation in Vietnam is forecast to increase to 4.2% in 2023 from 3.2% in 2022
▪ While Vietnam’s merchandise exports increased by 9.8% and imports rose by 8.6% during
2022, the country remained a net exporter of goods
▪ Gross fixed capital formation (GFCF) continued to increase over 2022, accounting for 29.0%
of GDP
▪ The public debt-to-GDP ratio in Vietnam rose to 51.3% in 2022, standing below the regional
average of 96.6%

PROSPECTS

Strong exports support GDP growth in Vietnam


In 2022, Vietnam's GDP expanded in real terms and surpassed the average growth rate of
the Asia-Pacific region. This growth was driven by elevated private spending, strong exports,
foreign direct investments (FDIs), public consumption, and gross fixed capital formation (GFCF).
The returned inflow of Chinese tourists and the renewal of trading relationships with China, after
the lifting of all COVID-19 restrictions, further supported Vietnam's economy. The manufacturing
industry remained the largest contributor to the country's economy in 2022, with Vietnam being
a major manufacturer of textiles, footwear, and electronics. Over the next five years, Vietnam's
economy is forecast to continue growing at a compound annual growth rate (CAGR) of 6.1% in
real terms, which is above the Asia-Pacific average of 4.4%. This growth will mostly be
supported by growing FDIs, along with a wealthier population continuing to increase spending
on goods and services.

Vietnam avoids rocketing inflation rates


In 2022, inflation in Vietnam increased to 3.2%, driven by global geopolitical tensions which
have created an energy crisis, and the inflationary impact of imported raw materials. The
inflation rise was lower than in the west due to contained food prices, as Vietnam depends less
on imported staple foods and experienced a less severe supply chain bottleneck impact.
Vietnam's inflation rate is expected to witness an upward trend over the next five years, with a
forecasted rate of 4.0% by 2027. To tame rising inflation, the central bank policy rate in Vietnam
increased from 4.0% in the previous year to 4.5% in 2022, as Vietnam's central bank has
tightened its monetary stance and raised key interest rates. Although this policy is expected to
mitigate inflation, it could weigh on economic activity and investment in the country.

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 2

Reopening of Chinese economy expected to boost trade


Vietnam's economy showed strong 9.8% growth in exports in 2022. The growth was primarily
driven by a surge in exports of machinery and electronic equipment in absolute value terms.
Notably, electronics and tech giants, such as LG Electronics, Panasonic, and Toshiba, have
manufacturing plants in Vietnam. Meanwhile, since the beginning of the USA-China trade war in
2018, Samsung moved its main Southeast Asia operations to Vietnam as well. Machinery and
electronic equipment continued to be the largest exports category in Vietnam in 2022,
accounting for 48.4% of the country's total exports value.
In 2022, Vietnam experienced a significant increase in merchandise imports, which surged by
8.6%. The strongest surge was seen in imports of machinery and electronic equipment, which
accounted for a substantial 44.1% of total imports. It is noteworthy that China remained a crucial
source of supply for Vietnam, providing 30.7% of all merchandise imported in value terms.

Multinational tech companies invest in Vietnam


In 2021, Vietnam experienced a decline in real terms in its foreign direct investment (FDI)
inflows, which decreased to USD16.1 billion. Similarly, cross-border mergers and acquisitions
(M&A) sales fell to USD480 million due to the COVID-19 pandemic's impact on movement
restrictions and lockdown measures. Despite these challenges, Vietnam's FDI inflows ranked
seventh out of 43 countries in the Asia-Pacific region in 2022, which remains above the regional
average of 1.8% in FDI inflows as a percentage of GDP. The country's stable political
environment, urbanisation, young population, and relatively low wages, continue to attract
foreign investors. In particular, the manufacturing and tech sectors are poised to receive the
bulk of planned FDI, with real estate also expected to receive a significant investment.
Several multinational tech companies, such as Samsung, LG, Foxconn, and Lego, announced
investments in Vietnam in 2022, with many shifting their supply chains and moving production to
the country. Notably, in December 2022, Samsung launched its research and development
(R&D) centre in Hanoi, which is regarded as a strategic hub in Southeast Asia and globally. The
facility is the largest research centre in Southeast Asia developed by a foreign company, and its
focus is on developing Vietnamese talent in areas such as AI, IoT, Big Data, and 5G. These
developments are expected to further bolster Vietnam's appeal as a destination for foreign
investment.

Vietnam's fiscal outlook remains uncertain due to rising debt and


inflation
In 2022, Vietnam’s government ran a budget deficit, reaching 6% of total GDP. Over the year,
government revenues decreased by 3.9%, while public expenditure grew by 3.8%. Spending on
general public services remained the largest spending category of Vietnam’s government,
accounting for 70.1% of total public expenditure. In 2023, the country’s budget deficit is forecast
to remain unchanged.
As Vietnam’s public debt rose by 8.9% over 2022, the public debt-to-GDP ratio increased
from 50.0% in 2021 to 51.3% in 2022, standing below the regional average of 96.6%. Debt
vulnerabilities are increasing at a time of historically high inflation and rising interest rates,
pushing up the costs of borrowing and narrowing the scope for government spending. Elevated
inflation, tighter monetary policy, and heightened economic uncertainty pose significant
challenges to policymakers, calling for prudence in managing debt and conducting fiscal policy.

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 3

COUNTRY RISK ANALYSIS


Economic uncertainties and risks have increased, taking a toll on Vietnam’s growth prospects.
According to the global scenario, worse-than-expected global negative spillovers from the
Russia-Ukraine war would lead to stagnant global economic growth combined with high inflation
(stagflation). Rising geopolitical tensions would negatively impact private sector confidence and
cause further disruptions to global energy and food supply, increasing the likelihood of more
persistent price pressures. Under this scenario, Vietnam’s economy would expand by 3.0%
annually in real terms in 2023 and grow by 4.3% in 2024.

ECONOMIC LANDSCAPE
Chart 1 Economic Landscape of Vietnam 2022-2027

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund


(IMF)/International Financial Statistics (IFS)/ International Labour Organization (ILO)/World Economic
Outlook (WEO)
Note: Data for 2023-2027 is forecast

Chart 2 Real GDP Growth in Vietnam 2010-2027

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 4

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund


(IMF)/World Economic Outlook (WEO)
Note: Data for 2023-2027 is forecast

Chart 3 GDP Size and Growth 2017-2027

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund


(IMF)/World Economic Outlook (WEO)
Note: Data for 2023-2027 is forecast

Chart 4 Gross Value Added by Sector in Vietnam 2022

Source: Euromonitor International from national statistics

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 5

Chart 5 Domestic Demand 2022 and Period Growth 2017-2022

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund


(IMF)/International Financial Statistics (IFS)

Chart 6 Productivity 2017/2022

Source: Euromonitor International from International Labour Organization (ILO)/Eurostat/national statistics

Chart 7 Productivity by Sector in Vietnam 2022 and CAGR 2017-2022

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 6

Source: Euromonitor International from International Labour Organization (ILO)/Eurostat/national statistics

MONETARY INDICATORS
Chart 8 Monetary Landscape of Vietnam 2022

Source: Euromonitor International from national statistics

Chart 9 Inflation 2017-2027

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 7

Source: Euromonitor International from national statistics/International Monetary Fund (IMF)/European Central
Bank/International Finance Statistics (IFS)/OECD/UN
Note: Data for 2023-2027 is forecast

Chart 10 Average Inflation 2017-2027

Source: Euromonitor International from national statistics/International Monetary Fund (IMF)/European Central
Bank/International Finance Statistics (IFS)/OECD/UN
Note: Data for 2023-2027 is forecast

Chart 11 Interest Rates in Vietnam 2017-2024

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 8

Source: Euromonitor International from national statistics/OECD


Note: Data from 2023 onwards is forecast

Chart 12 Exchange Rates 2017-2024

Source: Euromonitor International from national statistics/International Monetary Fund (IMF)/European Central
Bank/International Finance Statistics (IFS)/OECD
Note: Data from 2023 onwards is forecast

Chart 13 Money Supply Growth and Money Velocity in Vietnam 2017-2024

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 9

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund


(IMF)/International Financial Statistics (IFS)
Note: Data from 2023 onwards is forecast

FOREIGN TRADE
Chart 14 Foreign Trade Landscape of Vietnam 2022

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund


(IMF)/World Economic Outlook (WEO)/International Financial Statistics (IFS)

Chart 15 Exports and Export Price Index in Vietnam 2017-2022

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 10

Source: Euromonitor International from national statistics/International Monetary Fund (IMF)/European Central
Bank/International Finance Statistics (IFS)/OECD/UN

Chart 16 Exports by Commodity in Vietnam 2022

Source: Euromonitor International from United Nations (UN)/International Merchandise Trade Statistics

Chart 17 Top 10 Export Destinations 2022 and Period Growth 2017-2022

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 11

Source: Euromonitor International from International Monetary Fund (IMF)/Direction of Trade Statistics

Chart 18 Imports and Import Price Index in Vietnam 2017-2022

Source: Euromonitor International from national statistics/International Monetary Fund (IMF)/European Central
Bank/International Finance Statistics (IFS)/OECD/UN

Chart 19 Imports by Commodity in Vietnam 2022

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 12

Source: Euromonitor International from United Nations (UN)/International Merchandise Trade Statistics

Chart 20 Top 10 Import Origins 2022 and Period Growth 2017-2022

Source: Euromonitor International from International Monetary Fund (IMF)/Direction of Trade Statistics

INVESTMENTS
Chart 21 Investment Landscape of Vietnam 2021-2022

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 13

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund


(IMF)/International Financial Statistics (IFS)/UNCTAD

Chart 22 Foreign Direct Investment Inflows and FDI intensity 2021

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund


(IMF)/International Financial Statistics (IFS)/UNCTAD

Chart 23 Foreign Direct Investment Inflows and Outflows in Vietnam 2016-2021

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 14

Source: Euromonitor International from national statistics/UNCTAD

Chart 24 Gross Fixed Capital Formation in Vietnam 2017-2022

Source: Euromonitor International from national statistics/Eurostat/OECD/UN/International Monetary Fund


(IMF)/International Financial Statistics (IFS)
Note: Data from 2023 onwards is forecast

GOVERNMENT FINANCE
Chart 25 Government Budget Landscape of Vietnam 2022

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 15

Source: Euromonitor International from International Monetary Fund (IMF)/national statistics/World


Bank/Government Finance Statistics (GFS)/Eurostat

Chart 26 Public Debt 2022

Source: Euromonitor International from International Monetary Fund (IMF)

Chart 27 Government Revenue 2022

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 16

Source: Euromonitor International from International Monetary Fund (IMF)/Government Finance Statistics
(GFS)/national

statistics/Eurostat

Chart 28 Government Expenditure 2022

Source: Euromonitor International from International Monetary Fund (IMF)/Government Finance Statistics
(GFS)/national statistics/Eurostat

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 17

Chart 29 Government Expenditure by Economic Type in Vietnam 2022

Source: Euromonitor International from International Monetary Fund (IMF)/Government Finance Statistics
(GFS)/national statistics

Chart 30 Government Expenditure by Function in Vietnam 2022 and Period Growth 2017-
2022

Source: Euromonitor International from International Monetary Fund (IMF)/Government Finance Statistics
(GFS)/national statistics

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 18

FORECAST RISKS
Chart 31 Baseline and Scenario Forecasts in Vietnam 2020-2026

Source: Euromonitor International Macro Model


In the Global Stagflation scenario, worse-than-expected global negative spillovers from the
Russia-Ukraine war, through uncertainty, lack of confidence, and supply channel constraints,
cause stagnant global economic growth combined with high inflation (stagflation). More abrupt
and stronger cuts of Russian energy exports to advanced economies, and more difficult-than-
expected energy decoupling from Russia, worsen supply constraints and lead to higher energy
price increases. Private sector confidence declines by 15-35% and financial risk premia rise by
another 1-3 percentage points relative to the baseline forecast. Estimated probability: 25-35%
over a one-year horizon.
In the C19 Pessimistic1 scenario, the spread of a more infectious and highly vaccine-resistant
COVID-19 mutation requires intense lockdowns and social distancing measures in 2023,
delaying the economic recovery from the pandemic. The negative direct effects of the ongoing
pandemic on economic activity are amplified by declining private sector confidence, rising
uncertainty about the end of the pandemic, worsening financial market conditions, and a more
limited ability of governments to expand fiscal support programmes. Estimated probability: 7-
17% over a one-year horizon.
The Growth Slowdown scenario represents a typical/most likely combination of declining
private sector confidence and deterioration in financial market conditions. More pessimistic
expectations, higher uncertainty about the future, and worsening credit conditions reduce
consumer spending and business investment. GDP growth declines significantly below the
baseline for at least one year. Inflation declines and the central bank cuts interest rates in
response. Estimated probability: 15-25% over the coming year.
The Growth Acceleration scenario represents a typical/most likely combination of rising
confidence and better financial market conditions. Greater optimism, lower uncertainty about the
future, and improving credit conditions boost consumer spending and business investment.
GDP growth rises significantly above the baseline forecast for at least one year. Inflation
increases, and the central bank responds by raising interest rates. Estimated probability: 15-
25% over the coming year.

© Euromonitor International
ECONOMY, FINANCE AND TRADE: VIETNAM Passport 19

© Euromonitor International

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