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Vietnam might be Asia’s growth champion of the year. According to official data, Vietnam’s gross domestic product (GDP) for 2022 came in at 8.02%. This is the country’s fastest growth pace in 25 years and also well above the target expansion range of 6.0% – 6.50%.
At the same time, Vietnam’s GDP figure is also well above all other Asian economies, as previously estimated by the International Monetary Fund (IMF). India’s and the Philippines‘ projected growth rates of 6.8% and 6.5% come in closest to Vietnam.
“The economic performance is worth noting amid global economic and political uncertainty and challenges,” Vietnam’s General Statistics Office (GSO) said when releasing the figures.
The Southeast Asian country’s steep growth – from 2.58% in 2021 – is attributed to strong domestic retail sales and exports. Over the year, exports increased 10.6% to $371.85 bn, while retail sales grew 19.8%, as highlighted by the GSO. The manufacturing sector expanded by 8.1% in 2022, while the services sector grew by 9.99%.
Vietnam GDP – headwinds still blowing
However, there are economic headwinds which are slowing exports. “Though trade continues to expand, signs show weakening global demand for the country’s exports,” Asian Development Bank (ADB) said. Exports saw a decline in the last two months of the year, with a 14% decline in December from a year earlier. ADB is forecasting Vietnam GDP to grow at 6.3% in 2023.
Vietnam’s markets are likely to react negatively to the recession in the west. “Exports from Vietnam to the EU and US will most likely face some headwinds in 2023, given the risk that both, EU and US, will probably enter into a recession next year,” fund management company Asia Frontier Capital said. “But at the same time Vietnam will probably benefit from the current geopolitical tensions between US–China–Taiwan and the China’s zero Covid policy, with an accelerated manufacturing shift from China into Vietnam.”
Apart from the potential geopolitical issues, rising inflation is adding pressure on the economy. Consumer prices grew 4.55% from a year ago in December, whereas core inflation climbed 4.99%. According to Bui Thuy Hang, deputy director of the Monetary Policy Department at the State Bank of Vietnam, the country’s inflation forecast is about 5% in early 2023, higher than the government’s full-year target of 4.5%.
