ADB Forecasts Viet Nam's GDP Growth at 6.7 pct in 2021

The information was released on April 28 at a press conference where the ADB announced the Asian Development Outlook (ADO) 2021: Financing a Green and Inclusive Recovery.

The report highlights that the drivers of this growth will be industry, especially export-oriented manufacturing, increased investment, and expanding trade. Industry is forecast to expand by 9.5 percent in 2021, contributing 3.5 percentage points to GDP growth. 

The sector got off to a strong start in the first quarter of 2021, when it grew by 6.3 percent from the first three months of 2020. The purchasing managers’ index rose to 53.6 in March, its highest since January 2019. 

Services are expected to rebound by 6 percent in 2021, contributing 2.3 percentage points to GDP growth. Registered foreign direct investment increased by 17.8 percent in the first quarter of 2021 from the year-ago quarter. Overall investment growth will be further spurred by private investment, which has already risen substantially, stimulated by low interest rates and rising public spending.

Retail sales rose 5.1 percent in first quarter of 2021, indicating a recovery in consumer Inflation in the first quarter of 2021 slid to its lowest level since 2016 due to lower transport costs and subdued demand. 

Trade will remain robust in 2021, supported by strong economic recoveries in China and the U.S., Viet Nam’s two major trading partners, and the country’s participation in 15 major free trade agreements involving almost all advanced economies. 

Merchandise exports are forecast to rise by 8 percent this year and the next. Viet Nam’s continued economic dependency on foreign direct investment— which will see increased imports of capital goods and manufacturing inputs—and rising oil prices will push imports to grow by 5.0 percent, narrowing the current account surplus to the equivalent 2.0 percent of GDP this year and 2.5 percent in 2022. 

Meanwhile, the report shows that the major downside risks are the pandemic reemerging from new coronavirus variants and delays in the government’s vaccination plan. 

A faltering global COVID-19 vaccine rollout could have an immediate impact on Viet Nam being able to return to its strong pre-pandemic growth path given the country’s reliance on external demand. 

The fast revival of domestic private investment may also heighten the risk of asset bubbles if credit is not channelled to productive sectors. On the plus side, faster-than-expected recoveries in China and the U.S. would considerably expand trade and growth prospects.

By Thuy Dung