Thanks to strong exports and domestic retail sales, Vietnam’s economy grew 8.02% in 2022, the fastest annual growth rate since 1997. At the same time, the Southeast Asian country is facing the downside of a global economic slowdown.
Vietnam’s GDP growth rate for 2020 and 2021 is only 2.91% and 2.58% respectively due to the new crown epidemic factor. The related embargo measures at that time hit factory activities and thus the economy. Vietnam was a successful model for Asian economies prior to this. It had achieved a 7% economic expansion in 2019.
Vietnam’s official statistics bureau said the 8.02 percent growth rate exceeded the government’s previous target of 6-6.5 percent and the economy has recovered from the pandemic. Vietnam’s exports grew by 10.6 percent and retail sales by 19.8 percent in 2022, the statistics office said. In terms of specific sectors, this year Vietnam’s industry and construction grew by 7.78 percent, services by 9.99 percent and agriculture by 3.36 percent.
Despite achieving the fastest growth rate in decades in 2022, economists warn that Vietnam’s economy will face headwinds going forward with weak global demand already affecting its shipments. Vietnam is a major manufacturer of goods such as textiles, footwear and electronics from internationally recognized brands. Vietnam’s economic growth has slowed in the fourth quarter as the global economy has been hit by the Russia-Ukraine conflict and massive inflation.
The Statistics Bureau noted that Vietnam’s exports fell 6.1% year-on-year in the fourth quarter due to a lack of overseas orders. In December, exports even dropped 14% year-on-year while imports fell 8.1%. The drop in imports could signal a contraction in industrial production in the future as companies will purchase less materials and equipment needed for production. In addition, foreign direct investment (FDI) in Vietnam rose 13.5 percent this year to $22.4 billion. However, FDI commitments it indicates future inflows which fell 11 percent during the year to $27.72 billion. FDI is also one of Vietnam’s key economic drivers.
The slowdown in global growth will make it more difficult for Vietnam to increase exports or attract more foreign investment in 2023, said Can Van Luc, an adviser to the Vietnamese government and an economist at the Vietnam Investment and Development Bank.
Luc said that the upward pressure on inflation increases as the money supply increases at the end and beginning of the year. Vietnam’s consumer price index (CPI) rose 4.55% year-on-year in December, above the government target of 4% for the third consecutive month. Core inflation, which excludes food, fuel, healthcare and education services, rose 4.99% year-on-year in the month.
Vietnamese authorities had implemented two interest rate hikes this year and raised the benchmark rate by 200 basis points to 6 percent. The Vietnamese government is targeting 6.5 percent GDP growth and 4.5 percent inflation next year.
While Vietnam’s economy is performing well amid global economic uncertainty. The risks to the country’s economic outlook have risen. There are signs that global demand for the country’s exports is weakening although export trade continues to expand.
The recent cost-of-living crisis in Europe and the United States is the main overseas markets for Vietnamese goods which caused the purchasing power of local shoppers to plummet. According to the Vietnam General Confederation of Labor, nearly 500,000 workers had their working hours cut in the last four months of the year and about 40,000 lost their jobs.