Vietnam 2021 GDP Outlook at Risk as Virus Curbs Crimp Output
Vietnam Posts Record GDP Slump as Virus Curbs Crimp Output
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Vietnam’s statistics office forecasts gross domestic product to grow 2.5% this year, far below the official target of up to 6.5%, as tough anti-virus policies have impacted almost every corner of its economy.
The outlook, provided Wednesday by the head of GDP data at the General Statistics Office, paints an increasingly bleak picture for a nation that had earlier powered through the Covid-19 pandemic.
After successfully curbing infections during the early stages, the Southeast Asian nation now sees its export-dependent economy crippled by restrictions that are disrupting supply chains, shuttering factories and crimping output.
The full-year estimate comes after the statistics office earlier in the day reported that GDP in the third quarter slumped 6.17% from a year earlier, the worst performance since it started tracking the figure. That compares with a median estimate in a Bloomberg survey for growth of 1.95% and a revised 6.57% expansion in the second quarter.
Authorities have imposed tough measures for months to contain the virus, ranging from ordering factories to shut down if they can’t provide sleeping arrangements for workers to barring residents in the nation’s commercial hub of Ho Chi Minh City from shopping for food.
About 94% of the country’s companies are facing “difficulties,” Pham Dinh Thuy, head of industrial statistics, said at a briefing in Hanoi, citing supply chain disruptions, labor shortages and higher costs for wages and worker accommodations.
“Companies are exhausted,” Thuy said. “The government is working on multiple measures to help quickly get companies and businesses back to normal operations.”
Read more: Vietnam Jan.-Sept. Business Closures Rise 16.7% Y/Y to 45,100
The head of GDP statistics, Le Trung Hieu, said growth in the final quarter of the year could be 5.3%, after expanding 1.42% during the first nine months.
To meet the government’s official full-year target range of 6%-6.5%, the country would need “a very high growth rate” in the fourth quarter and “that’s impossible now” Hieu said. Growth at 2.5% for 2021 is the “most realistic” outlook, he said.
The benchmark VN Index closed little changed at 1,339.21 on the Ho Chi Minh City Stock Exchange, erasing an earlier loss of as much as 0.8%.
Rapid Recovery?
Nguyen Anh Duc, head of institutional sales at SSI Securities Corp., said the relatively benign market reaction is due to government easing of tough anti-virus restrictions in Hanoi, Ho Chi Minh City and other southern industrial regions amid a rise in vaccinations.
“If the government keeps up its pace of vaccinations, it is reasonable to believe that the economy will start recovering,” Duc said. “If the virus is well controlled, the economy will recover rapidly next year.”
About 8.8% of the nation’s population has been fully vaccinated, according to the health ministry. In Ho Chi Minh City, more than 29% of residents were fully vaccinated as of Monday, according to the city’s press center.
Virus measures have shuttered factories across the southern economic core around Ho Chi Minh City, particularly clothing and shoe manufacturers with clients that include Urban Outfitters Inc., Nike Inc. and Abercrombie & Fitch Co. Meanwhile, some higher-end technology manufacturers have been able to keep running with smaller, isolated workforces.
Other details from the statistics office on Wednesday include:
- Exports fell 0.6% in September compared to a year earlier, while imports climbed 9.5%.
- Consumer prices rose 2.06% in September from a year earlier. The government aims to cap average inflation at 4% this year
- More data here
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