Vietnamese economy to recover fast in 2022: Fitch Ratings

HANOI, Feb 7 -- Vietnam’s recovery is set to gather momentum in 2022, as domestic demand rebounds and export performance remains strong, according to Fitch Ratings. 

 In its recent report, Fitch said that improving levels of vaccination in the country should reduce the risk that the recovery is set back by further COVID-19 outbreaks. 

However, the evolution of the pandemic remains subject to uncertainties, in particular as daily cases have trended higher in recent months, reported Vietnam News Agency. 

 Economic growth in 2021, at 2.6 per cent, was much weaker than the 7 per cent that Fitch had expected in April 2021, when it affirmed Vietnam’s rating at ‘BB’ and revised the Outlook to Positive, from Stable. 

 According to Fitch, this partly reflected a 6 per cent year on year contraction in real GDP in the third quarter last year as the authorities moved to control a surge in COVID-19 cases.

Further pandemic-related shocks, while possible, are unlikely to be so severe, because the government has shifted from a “zero COVID” approach to one of flexible adaptation as vaccination rates have increased, it said. 

 Growth will be led by exports, which rose by 19 per cent in 2021, it said, adding that it expects goods demand growth to decelerate in the developed world in 2022 as activity normalises and services demand picks up. 

Inward investment remained strong in 2021, at US$19.7 billion, down only slightly from US$20 billion in 2020. The strong export performance that Fitch expects in 2022-2023 will catalyse domestic investment and consumption, through positive spill-overs, for example from job creation.

 Fitch’s current forecasts see Vietnam's public debt/GDP ratio broadly stable over 2022-2023, at around 41 per cent of GDP. Since this forecast, the government has approved a fiscal stimulus package covering the period, worth around US$15.3 billion (roughly 4 percent of 2021 GDP), but Vietnam’s debt/GDP level will remain below the peer median of 56.6 per cent in 2022 and 56 per cent in 2023, it noted. 

The package continues certain tax breaks and exemptions, which will weigh on the revenue base, but these may be rolled back as the recovery strengthens. It also contains additional infrastructure spending that could help to underpin medium-term growth prospects, Fitch commented.

-- BERNAMA