Vietnam’s household spending is projected to grow by a real rate of 9.6% year-on-year over 2021, a significant improvement from a projected 0.5% growth in 2020, according to Fitch Solutions, a subsidiary of Fitch Group.
The rate is even higher than the 7.1% year-on-year growth from a pre-Covid-19 environment in 2019, stated Fitch Solutions’ report.
Overall, all of the main consumer spending categories will return to positive growth in 2021. Food and nonalcoholic drink spending were prioritized in household budgets in 2020, and so growth in spending on these items, while remaining positive, will be slightly lower in 2021 at 7.8% year-on-year, from the 12.6% growth estimated for 2020.
Meanwhile, spending within other consumer categories is estimated to record contractions over 2020, as households cut spending on non-essential items. As such, these categories will grow from a relatively lower base over 2021 and thus will report stronger year-on-year growth over the year.
The improved forecast outlook for consumer spending in Vietnam in 2021 is in line with its forecast that the Vietnamese economy will grow by a real rate of 8.2% year-on-year over 2021, accelerating from an estimated growth rate of 2.6% over 2020.
This will help reduce the unemployment rate in the country, which is projected to average 2.5% of the labor force in 2020, as a result of the economic impact of Covid-19.
Vietnam’s unemployment rate is forecast to return to a pre-Covid-19 level of 2.2% year-on-year in 2021, although Fitch Solutions did note that the definition of those formally employed may have changed. People returning to work but working fewer hours than pre-Covid-19, or taking lower paying jobs, will put downside pressure on disposable incomes.
Government Support Measures
As of October 2020, the Vietnamese government has implemented a VND284 trillion (US$12.2 billion or 3.6% of GDP) fiscal package to support the economy. Some of the measures contained in the package included a cash transfer package of VND36 trillion (US$1.5 billion or 0.5% of GDP) to help households that have been negatively impacted by Covid-19 restrictions during April to June 2020.
Households also received a maximum 10% rebate on electricity prices for a three-month period to assist with living expenses.
Fitch Solutions' forecasts take into account risks that are highly likely to play out in the short term, such as the easing of government support. However, there are risks to the outlook that, if they do start to play out, will lead to forecast revisions, it stated.
