Vietnam’s growth froze in the first quarter of the year but continued to record a GDP growth rate of 3.82%. Manufacturing and exports continued to maintain moderate growth, although the growth figures also weakened towards the end of the quarter. Vietnamese exports were USD 63.23 billion in Q1 / 2020, an increase of + 7.5% y-o-y. In March, export growth remained at 6%, which surprised with its strength, but we expect the figures to weaken significantly in the second quarter. Exports in March were particularly driven by exports to China, which grew by + 33% y-o-y. The trade balance at the beginning of the year posted Vietnam with a substantial surplus, nearly $ 4 billion, boosting up the country’s foreign exchange reserves and providing support for the stable currency.
During the current quarter, GDP growth rate will weaken sharply with the retail and service sector. However, the retail and service sector is only about 40% of Vietnam’s total economy (the equivalent figure in the US is approximately 80%). In the future, industrial readings will also weaken significantly, and the impact will be substantial in current and upcoming months.
At the same time the Vietnamese government has launched extensive stimulus programs, in which companies, especially in the retail and service sectors, are facilitated through borrowing costs, taxes, land rents. The Vietnamese government has also set out to boost up public investment projects: such as metro lines and highways. Saigon’s new airport, planned for ten years, has also made clear the start date for construction.
This week, Vietnam has announced an average GDP growth target of 7% per year for 2021-2025. These goals are realistic, although the growing public debt in the Western world will cut some of the overall growth in global demand this decade. We expect Vietnam’s GDP growth in 2020 to reach 3%.