World Bank forecasts Vietnam’s economic growth in 2022 to reach 5.3%

In a report published on April 5, the World Bank (WB) forecasted economy Vietnam will grow 5.3% in 2022. According to the World Bank, the forecast is based on the policy of living with COVID-19, solid results of the processing and manufacturing industries and the recovery of domestic demand. .

Poverty rates are expected to decline in 2022, but at a slower rate than before COVID-19.

Over 78% of the population has been fully vaccinated, but the World Bank believes that the economy still faces negative risks related to new strains, the global impact of the Russia-Ukraine conflict, commodity prices. globalization and the slowing growth of key export markets.

5.3% growth

According to the World Bank’s forecast, Vietnam’s GDP growth will reach 5.3% in 2022 and then stabilize around 6.5% under the scenario where travel restrictions are eased both at home and abroad.

The service sector is expected to recover step by step when people’s confidence consumption restore and international tourist tourism will gradually return from mid-2022.

Export turnover of processed and manufactured goods is forecasted to increase at a slower rate as growth in key export markets of Vietnam (the US, the European Union and China) slows down.

The World Bank believes that the economy is recovering from a prolonged social distancing period in the third quarter of 2021 related to the COVID-19 outbreak that began in April 2021. However, according to the World Bank, this prospect still faces increasing negative risks.

Slowing growth in key trading partners coupled with a trade rate shock due to the Russia-Ukraine conflict and related sanctions could affect the recovery. Vietnam is also going through a period of strong infection with the Omicron strain in the first quarter of 2022.

Economic recovery also depends on the speed of recovery of domestic private demand, which is still relatively slow, showing the cautious sentiment of consumers and investors.

The current phase of strong infections could lead to temporary disruptions in labor supply and production. The economy has recovered strongly since the beginning of the year, so if the government deploys a strong support package with fiscal policy, the impact on economic growth can be mitigated.

The risks are increasing

“Monetary policy still needs to loosen, but must continue to be cautious to control risks in the financial sector“, the World Bank recommends.

According to the organization, in the medium term, the goal of turning Vietnam into a middle-income economy will depend on its ability to transform its current growth model to one based on productivity and innovation. creation.

The World Bank recommends that the Government introduce structural reforms, creating leverage for the transition. This process should focus on building a digitally transformed, greener and more resilient economy.

The World Bank believes that the economic picture may deteriorate if there are more shocks. Accordingly, GDP growth will only reach 4% in 2022, then return to 6% and 6.5% in 2023 and 2024, respectively.

Poverty is expected to fall in 2022, assuming GDP growth recovers to pre-pandemic levels, but the impact of the crisis will have a lasting effect on increasing inequality.

For example, households in the bottom 20% of the population had the slowest rate of income recovery as of the first quarter of 2021, even before the social distancing period in the third quarter of 2021.

Poor households are less able to cope with the impact of income shocks, and are more dependent on external resources, such as borrowing.

“Rising inequality can lead to economic and human capital consequences for the country“, the World Bank warned. Sold properties cannot generate future income, while the uneven quality and disruption of education during the COVID-19 crisis will leave a mark. consequences on human capital accumulation and lifetime earning potential.