While much of the world has been reeling from the impact of Covid19, and focussed on dramas like the US presidential elections and Brexit, a remarkable success story has been written in southeast Asia.
Vietnam’s GDP was up by a remarkable 2.91% in 2020, according to its own government figures (NB. China grew by 2.3%), making it one of the few countries in the world to see positive economic growth despite the pandemic.
Containing Covid19
A major contributor to this glowing economic health has undoubtably been the way the country has handled Covid19. Despite being densely populated, Vietnam has reported less than 35 Covid19-related deaths (Johns Hopkins University data, 3 March 2021) – a remarkable performance for a nation of more than 97 million! Contact tracing, strategic testing, mask wearing, and clear central messaging all mitigated the need for mass lockdowns – and much of the economy was protected as a result.
However, economic growth in 2020 was far from evenly spread across all sectors.
Asymmetric growth
Export-driven manufacturing has powered Vietnam’s success for years, with international businesses investing heavily in order to diversify their global supply chains, developing lower-cost alternatives to China’s factories in particular, or a so-called “China +1” arrangement. As a result, FDI in Vietnam is now estimated to be worth a whopping US$382 billion, 48% of which is in manufacturing and processing.
This well-oiled manufacturing machine kept running impressively through 2020, with industrial activity expanding by 3.3%, and exports of goods up by 5% in value. Such healthy growth was more than enough to offset pandemic-related shrinkage in other parts of the economy – the hospitality sector, for instance, which contracted by 14.6%.
There are, however, good reasons to be optimistic that service sectors and domestic consumer demand will return to growth in 2021.
Exciting prospects
This is a youthful nation (55% are under the age of 35) with low unemployment – it’s no wonder that Vietnam’s middle class, currently around 13% is expanding so rapidly. Analysts predict this group to double again by the year 2026, and consumer spending to rise quickly as a result.
A member of APEC, ASEAN and the new RCEP trading block, Vietnam has a bilateral trade agreement with the USA, and last year signed FTAs with the European Union and the UK too — all of which should further boost trade flows, and grow their economy further.
With these things in mind, the World Bank expects the Vietnamese economy to grow by 6.7% in 2021, and the Bank of America’s forecast is even higher, at 9.3%.
The Melchers Group started its activities in Vietnam in the 1980s and officially inaugurated its first branch in Ho Chi Minh City in 1990. Nowadays, the company runs offices in Ho Chi Minh City and Hanoi to coordinate Melchers’ trading activities in Vietnam.
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