As the world pulls out of the crisis, Vietnam will be an economic benefactor from the way they managed the catastrophe, according to CEO of HSBC Vietnam.
This is reflected in positive economic forecasts for the year ahead with HSBC’s own house-view that the country’s GDP will rebound strongly with 8.1% growth in 2021 from 2.6% in 2020, said CEO of HSBC Vietnam Tim Evans.
| Vietnam's growth set to rebound thanks to the way it deals with the crisis |
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2020 achievements
Facing many obstacles caused by the Covid-19 pandemic, Vietnam still recorded a GDP growth of 1.8% in the first half of 2020, and is one of the very few countries in the world to maintain positive growth momentum in 2020.
Average inflation over the first 11 months in 2020 was effectively controlled with an increase of 3.51% on-year, which is lower than the target of below 4% set by the National Assembly. This was achieved thanks to the government’s efforts to control the epidemic and the subsequent waves that hit the country.
Despite 2.6% being the lowest growth rate in many years, Vietnam is still the only ASEAN country to evidence positive growth this year. Also, according to the International Monetary Fund (IMF), Vietnam’s GDP growth is expected to reach 2.4% for 2020 and remains one of four economies in the world that have positive growth of GDP per capita this year, including Taiwan, Egypt and China.
In 2020, manufacturing and exports remain the two driving forces for Vietnam's economic growth, together with foreign direct investment (FDI) which also plays a crucial role.
November indicators showed that Vietnam was on track for a solid economic recovery. Manufacturing has grown double digits for the first time since the start of the Covid-19, while exports continue to shine due to increased electronics shipment.
The index of industrial production (IIP) for 11 months of 2020 is estimated to increase by 3.1% over the same period last year. The export turnover of 11 months of 2020 is estimated to achieve US$254.6 billion, up 5.3% on-year.
Vietnam’s international profile continues to grow with increasing economic integration from joining the World Trade Organization (WTO) and the signing of 14 active multi- and bi-lateral trade agreements.
This international trade connectivity has been a major driving force for Vietnam's economic development, but it also means the economy might be impacted when subjected to a global crisis like Covid-19.
However, the Vietnamese economy has shown its incredible resilience during these unprecedented times. In fact, the World Health Organization (WHO) and many other countries have lauded Vietnam for its highly successful and effective response in handling the pandemic.
| CEO of HSBC Vietnam Tim Evans |
Business resilience
Another thing that Tim Evans would like to call attention is the remarkable determination of Vietnamese businesses community.
He said the business community has decided to not surrender or succumb to the difficulties caused by the external environment but instead has looked to find ways to overcome the challenges they faced as a result of lockdowns, closed borders and social distancing measures.
According to the recently published HSBC Navigator report, 68% of Vietnamese companies implemented changes over the last 12 months to cope with the pandemic. In addition, moving forward, they intend to focus their investment on sales channels, up-skilling their workforce, enhancing the customer experience and improving cash flow/capital management in 2021.
They also intend to invest in technologies that will help improve speed to market, customer targeting and enhance automation/ operational efficiency.
He said in his own meetings with HSBC clients during 2020, he has seen first-hand how they seek to continuously improve their business model through leveraging digital transformation, proactively approaching banks to find solutions to optimize cash flow management and applying digital solutions to maximize operational efficiency.
It’s worth noting of not only a continuous growth, but much of Vietnam’s recovery comes from internal forces.
Supporting factors
The General Statistics Office’s statistics show that manufacturing and services have continuously accelerated from the sharp decline experienced during the lockdown period, meaning that the economy has growth momentum. Exports rose 10.7% on-year in November, after upwardly revised growth of 12.2% on-year in October.
While weakness in textiles and footwear (down 12% on-year) has exacerbated as a result of the renewed lockdowns globally, strong expansion in machine equipment (62% on-year) and electronic shipments (6% on-year) have more than offset their declines leading exports on a steady recovery path.
The PMI, although dipping to 49.9 in November after two months’ expansion does not mean a gloomy manufacturing outlook. The storm and flood disruptions were pointed as the reason for the setback, which is likely to be temporary.
After all, new orders continued to expand, and the gap between new orders and inventory remained in positive territory.
“Therefore, we continue to hold a positive outlook for the Vietnamese manufacturing industry and for the Vietnamese economy as a whole,” Tim Evans said.
Another bright spot for Vietnam's economy in 2020 has been the government’s consensus in pursuing the international trade integration policy which has been reflected by the conclusion of negotiation of the UK Vietnam Free Trade Agreement (UKVFTA) in December, the effect in August of the Vietnam - EU Free Trade Agreement (EVFTA) and the recently signed Regional Comprehensive Economic Partnership (RCEP).
These agreements will help Vietnam diversify export markets and trading partners, which is also one of the best ways to minimize risks from excessive dependence on a specific trading partner which Covid-19 has made this risk apparent.
The increased and diversified global integration will also help Vietnam access foreign capital sources, supporting Vietnamese businesses to become more competitive.
“I, for one, continue to see Vietnam as being among the world’s most attractive emerging economies,” Tim Evans emphasized.
