HCMC – Vietnam’s economic recovery accelerated in the last quarter of 2020, making the country one of the fastest growing economies amid the Covid-19 pandemic, according to the World Bank.
The Vietnamese economy grew by 4.5% year-on-year in the fourth quarter of 2020 and thus expanded by 2.9% in 2020. Although that was significantly lower than the 7% growth rate in 2019, the country was one of the few economies that grew during the pandemic.
At the sectoral level, agriculture was the most resilient with an estimated growth rate of 2.68%, while industries and services grew at 3.98% and 2.34%, respectively. The tourism-related sectors have been the most affected by the crisis, with accommodation and catering services dropping by 14.7% in 2020 compared to 2019.
In December 2020, the industrial production index grew again after the brief November slump. The index grew by 11.1%, the highest growth rate since the outbreak of the pandemic in February. The main subsectors supporting this growth were petroleum products, metal production, computers, electronic and optical products, food production and processing, electrical equipment and paper and paper products.
Retail sales grew at 9.4% year-on-year in December 2020, the highest growth rate since February 2020. Growth was driven by domestic demand, with the retail sales of goods 13.8% higher than that of the same period of 2019. On the other hand, with international travel restrictions, sales of accommodation and catering and traveling services in December 2020 fell 5.4% and 68.2%, respectively.
Registered foreign direct investment reached some US$2.1 billion in December 2020, roughly 28.9% lower than in the previous month and 66.3% lower than in December last year. Overall, the country attracted FDI worth over US$28.5 billion in 2020, which despite being some 25% lower than 2019, remains a remarkable achievement.
After the State Bank of Vietnam cut policy interest rates in October 2020 in an effort to ease the cost of credit, credit growth picked up from 9.6% in October to 10.5% in November and 10.1% in December. Since this rate was higher than the nominal gross domestic product growth, the credit/GDP ratio had increased from some 136% in 2019 to over 143% in 2020.
According to the World Bank, the approval of several Covid-19 vaccines at the end of 2020 gives hope for a more positive 2021, particularly for tourism and airlines. The downside risks include the delayed distribution and administration of the vaccines.
The World Bank suggested that the Vietnamese Government should carefully assess when to unwind Covid-19-related fiscal and monetary policies launched to support the economy.