An aerial view of Cat Lai Port in District 2, Ho Chi Minh City. Photo by Shutterstock/Hien Phung Thu.
Vietnam’s GDP will expand by 8.6 percent this year, the highest in over two decades, market research firm Fitch Solutions has forecast.
The firm revised the growth rate, the highest in 24 years according to World Bank’s data, from the earlier 8.2 percent, expecting a global vaccine rollout to drive recovery in external demand for Vietnamese exports and also bring about regional travel bubbles to jump start inbound tourism.
Growth will be driven by industrial production and construction, supported by growing external demand following the commencement of the EU-Vietnam Free Trade Agreement (EVFTA) and the Vietnam-U.K. Free Trade Agreement (UKVFTA) last year, Fitch Solutions said in a report.
The UKVFTA would position Vietnam as a key country to source lower value added goods and agriculture goods from Asia in the coming years, considering that the U.K.’s other existing arrangements in the region are with more developed countries specializing in higher value-added products.
There is large scope for growth in Vietnamese exports in the years to come as the country has been a major beneficiary of the supply chain relocation trend out of China, the report notes.
Effective containment of Covid-19 in Vietnam would also allow for smoother progress of private construction projects in housing and commercial real estate, as well as key public projects like the Eastern North-South Expressway and Long Thanh International Airport.
The services sector, which saw demand plunge last year due to the pandemic, is set to benefit from Vietnam’s ongoing economic recovery combined with a good likelihood for its involvement in regional leisure travel bubbles in 2021 considering progress seen in the ongoing global Covid-19 vaccine rollout.
Financial services will likely also continue registering stronger growth over the coming quarters as an improving economic outlook spurs an increase in credit demand, supported by low interest rates.
“We expect 2021 to herald a year of economic recovery around the world, which should support external demand for Vietnamese exports,” the report says.
Vietnam’s GDP growth was 2.9 percent last year, lowest in 2011-2020, but still among a small number of countries with positive growth at a time the pandemic has sent major economies into contraction.