Despite adjusting its forecast for Vietnam's GDP growth this year to 5.1% due to the heavy impact of the fourth outbreak, HSBC still expects that Vietnam's economy will soon accelerate and grow. return immediately after overcoming the epidemic.
The effects of the 4th outbreak are showing more seriousness than the period of social distancing in the country for 3 weeks in April 2020. Accordingly, it is not surprising that August's figures clearly reflect the economic losses Vietnam is suffering. However, developments in many markets show that economic activities tend to recover strongly at the time of economic opening and HSBC expects to see the same thing in Vietnam.
Courageous growth expectations
Tim Evans, General Director of HSBC Vietnam, said that this year has started very well with exports having a positive growth momentum thanks to a series of Western economies starting to reopen after a prolonged period of lockdown. long in 2020 and Vietnam begins to benefit from the many Free Trade Agreements signed in the past.
As a result, HSBC's Global Research has forecast Vietnam's GDP growth this year could reach 7.1%, and the economy itself is also showing confidence that this is a growth rate. completely achievable.
The only thing that no one could have predicted, according to Tim Evans, was the Delta mutation, a dangerous mutation capable of spreading so quickly that it is difficult to control. This mutation has spread throughout Vietnam, especially in the South - which is the economic center of the country, forcing the authorities to quickly implement the distancing measures and issue regulations restricting movement. transfer.
This situation led to a decline in foreign direct investment (FDI) into Vietnam. Specifically, total registered FDI capital decreased by 11.1% in the first 7 months of 2021 compared to the same period last year (in July alone, it decreased by 53.8%).
“However, the positive point is that realized FDI increased by 3.8% in the first 7 months of the year compared to the same period last year. Most of this capital is poured into the manufacturing and processing sector, and then to the electricity generation and distribution segment, ”said Tim Evans.
Another effect of social distancing, Mr. Tim Evans said is that consumption is hit hard. Retail sales fell 19.8% in July, the deepest drop since April 2020. Car sales dropped significantly with the passenger car segment down 15.9% year-on-year in June and the transportation business also down 1.8% year-on-year.
The impact on the manufacturing sector became more severe in August and the current restrictions caused some businesses to temporarily close, while social distancing and movement restrictions led to a decline in the number of businesses. decrease in output, new orders, purchasing power and employment.
All of that has caused unprecedented supply chain disruptions that have already piled up due to bottlenecks around transportation and backlog pressure at domestic ports.
One bright spot is that the export of mobile phones is surprisingly resilient. “The root cause is that assembly clusters are mainly concentrated in the North where production activities have gradually returned to normal after two severe outbreaks in May and June,” said Tim Evans. .
2 scenarios for the economy
According to Mr. Tim Evans, Vietnam's economic outlook by the end of the year depends a lot on the effectiveness of vaccination for people combined with reopening the economy at the right time.
"However, I do not expect that we can return to a completely normal situation in the near future and because of those factors, we have two scenarios for the Vietnamese economy until the end. year", the HSBC leader noted.
Scenario 1, GDP growth is in the range of 5-5.5%, depending on the progress and effectiveness of the vaccination program, the reopening of the economy and the ability to recover and restart the economy. large export market in the context of many challenges due to the Delta mutation.
Scenario 2, if the vaccination program is not implemented quickly enough while the gap is prolonged, the economy will suffer more severe impacts and put more pressure on the supply chain, GDP will be able to grow in Vietnam. level 3.5-4%.
Mr. Tim Evans emphasized: “In any scenario, the economy needs to be reopened and deployed cautiously and methodically according to the roadmap. In many other markets, economic activities tend to recover strongly as soon as the economy opens and we expect to see the same in Vietnam.”
At the same time, HSBC believes that consumption activity will recover very strongly as soon as this outbreak gradually subsides. When the economy reopens, supply chain problems will soon be resolved, orders will return, and FDI will also recover in the context of a stable government with consistent policies, sources quality/sustainable workforce, a series of Free Trade Agreements and a government commitment to invest 7% of GDP in infrastructure development.
Besides, Mr. Tim Evans acknowledged that, despite the current situation, Vietnam is still an attractive destination for investors in the medium term. Vietnam's strong foundational conditions will help investors hedge against short-term fluctuations caused by Covid-19.
Mr. Tim Evans specifically cited that Korean investors, who understand Vietnam very well, are continuing to invest in this market. Samsung is expected to prepare to expand its phone factory in the second half of this year to increase production of foldable phones by 47% to 25 million units. Meanwhile, LG Display has also just been approved an additional investment of $ 1.4 billion for a factory in Hai Phong.
"The pandemic has contributed to promoting automation and digitization trends, so Vietnam will benefit as a major technology producer in the world," HSBC said.
Notably, HSBC forecasts GDP growth will reach 6.8% in 2022 with a reliable outlook in the short term as well as in the long term. “Our clients are advised to put aside the immediate pain and start planning for the future as we get through this terrible epidemic. Opportunities will open up, the economy will grow, Vietnam will recover and once again prove that no country is better than Vietnam when it comes to a challenge or an obstacle,” said Tim Evans.
(Translated by Google)