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Vietnam will be the fastest growing economy in Asia-Pacific this year, according to the new economic update by the World Bank. In its report covering East Asia and Pacific (EAP) region, the World Bank predicts the Vietnam economy to grow 7.2% – up from an estimated 5.3% in the April forecast. According to the report, growth in most of the economies of developing East Asia and the Pacific rebounded this year, but China lost momentum.
The World Bank sharply downgraded China’s growth forecast to 2.8% from 5% in April 2022 owing to the country’s ‘Zero Covid-19’ policy. Excluding the People’s Republic, the region is expected to grow 5.3% this year. Including China, the region is forecasted to slow to 3.2% growth in 2022 from 7.2% in 2021.
Vietnam’s economic growth gets momentum
The Asian Development Bank is similarly positive about Vietnam. The bank upgraded its forecast for the country earlier this month to 6.5% in 2022 and 6.7% in 2023. The country’s economy is likely to accelerate further.
“Vietnam’s economy recovered faster than expected in the first half of 2022 and it continues to grow amid the challenging global environment,” said Andrew Jeffries, ADB Country Director for Vietnam. Jeffries added that the steady recovery was supported by strong economic fundamentals and driven by a faster-than-expected bounce back in manufacturing and services.
Tourism is also expected to support the economy, now that domestic mobility has normalized and Covid-19 travel restrictions for foreign visitors have been lifted. However, there are still uncertainties ahead. “The global economic slowdown could weigh on Vietnam’s exports. Labor shortage is expected to weigh on the fast recovery of the services and labor-intensive export sectors in 2022,” ADB said.
Digital economy going strong
Meanwhile, Vietnam’s young population is an advantage for Vietnam’s economy. According to the World Bank, nearly 56% of its people are under 35. “With Gen Xs and Gen Ys forming most of the country’s labour force and consumer markets, and Gen Zs rapidly emerging as the next wave of consumers, Vietnam is set to climb eight places to 18th position in the global ranking of top 30 largest consumer markets by 2030”, Le Hoang Vu, Investment Director at Eastspring Investments wrote in a market assessment.
These young consumers are embracing new trends such as digitalisation, lifting the country’s digital economy. The country is seeing strong growth in e-commerce, fintech, and education. According to recent figures, Vietnam’s digital economy is expanding by double digits, with a total market value of $57 bn predicted in 2025.
“Vietnam’s fast-growing digital economy is likely to help the country become a high-income economy by 2045,” the expert from Eastspring adds.
