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Economic update – An encouraging Jan to herald a good year

Economics Note 16/02/2022    427


  • Vietnam’s Purchasing Managers’ Index (PMI) climbed to 53.7pts in Jan 2022, marking the highest level since Apr 21.
  • We saw significant improvement in tourism and transportation thanks to higher vaccination rate and new adaption measures to the pandemic.
  • We expect Vietnam’s GDP to grow 5.5% in 1Q22F and 7.5% in 2022F, fueled by recovery of domestic demand and strong FDI inflows.

Manufacturing activities improved further
According to General Statistics Office of Vietnam (GSO), Vietnam’s Index of Industrial Production (IIP) in Jan 2022 slid 3.1% mom but still rose 2.4% yoy. Moreover, Vietnam’s Purchasing Managers’ Index (PMI) in Jan 2022 climbed to 53.7pts from 52.5pts in Dec 2021, marking the highest level since Apr 21. The higher PMI index indicated a further expansion in manufacturing sector in Jan 22.

Service sector likely to bottom out
Vietnam’s service sector kicked off the new year quite positively with gross retail sales of consumer goods and services in Jan 2022 reaching VND470 trillion, up 6.7% over that in the previous month and up 1.3% over that in the same period last year, thus improving from a 2.7% yoy decline seen in Dec 2021. If excluding the price factor, this indicator slid 0.3% yoy (that in Dec 2021 fell by 6.5% yoy).

Inflation slightly edged up amid higher petrol prices
Vietnam’s headline inflation edged up to 1.9% yoy in Jan 2022 (slightly higher than the level of 1.8% yoy in Dec 2021). On a mom basis, the headline CPI rose 0.2% as transportation price index rose by 1.2% mom due to several hikes of petrol price and increase in beverage and tobacco price index (+0.6% mom).

We expect Vietnam’s GDP to grow 5.5% in 1Q22F
We expect industrial activities to accelerate growth in the upcoming months thanks to (1) more people returning to work after the last outbreak is contained, (2) foreign direct investment picks up, following high vaccination rate and the new adaption measures to the pandemic in Vietnam and (3) global demand for Vietnam’s export remains strong. The service sector is expected to maintain its recovery momentum thanks to (1) reopening of non-essential services (tourism, public transport, entertainment,…) and (2) domestic demand recovering after the government relaxes regulations on social distancing and cut value added tax (VAT) from 10% to 8%. As a result, we forecast Vietnam’s GDP to expand 5.5% yoy (+/- 0.3 percentage point) in the first quarter of 2022 (vs. +4.7% yoy growth in 1Q21 and +5.2% yoy growth in 4Q21).

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