Vietnam’s Economy Shows Signs of Rebound after Q3 Contraction
Like most countries, Vietnam experienced a rough 2020 as a result of the pandemic. Still, its economy was one of the best-performing in the world even in 2020. Come read our blog to see how Vietnam's economy is showing signs of recovery following a recent slump.
Vietnam had a harsh year in 2020, as the COVID-19 pandemic knocked out international tourism. Export industries have also suffered from less trade, and factories had to close due to the lockdowns. Still, even in 2020, Vietnam was one of the best-performing economies globally.
Mixed Performance in 2021
2021 has seen strong growth in the first half of the year. Second-quarter GDP was up 6.6% year-on-year. Then, GDP contracted by over six% year-on-year in the third quarter, as lockdowns due to the Delta variant severely hit manufacturing, building activity, and consumer spending.
But that contraction seems short-lived. The latest economic data for Q4 shows signs of recovery. The IHS Markit Vietnam Manufacturing PMI for October 2021 displayed a strong manufacturing rebound. While economic recovery still faces headwinds due to the Omicron variant and an increase in daily COVID-19 cases, fourth-quarter GDP figures will likely be significantly better than they were in the third quarter.
A Positive Outlook
Before the pandemic, Vietnam was one of the fastest-growing economies globally. Foreign direct investment inflows, especially in the manufacturing sector, have lifted the country’s economic activity.
Vietnam has also signed a free trade agreement with the European Union (EU), and will likely continue to benefit from the ASEAN Free Trade Agreement (AFTA) signed with its neighboring countries. In fact, AFTA has removed tariffs on trade between ASEAN member countries since 2010.
Looking at all these factors, it is highly likely that Vietnam will get back on its strong growth path after the pandemic subsides. On the other hand, it may take longer than in the West to overcome COVID – currently, the fully vaccinated share of the total population sits at around only one-third – but the general growth outlook for Vietnam's economy remains positive for the time being.
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