An Overview of Vietnam’s GDP
For the first time since Q4 of 2019, Vietnam’s GDP grew by more than 6% during the second quarter of 2021. When compared to Q2 2020’s GDP, this is a stunning development. The current restrictions due to covid, however, have already had an impact on Vietnam’s economy, slashing the growth prediction for 2021 to 4.5%. Depending on how long the scenario lasts, the economy may be hit much harder.
Investing in Vietnam? Read About Cekindo’s Business Incorporation Services
Manufacturing and construction were crucial in achieving these excellent results. Every quarter, this sector outperformed the others, with the biggest growth of more than 10% in Q2 2021. Until April of this year, a minor impact on production was witnessed but continued to adequately contribute to the economy.
The difficult standoff in which China and the United States find themselves has undoubtedly aided as well. Companies such as Samsung and Foxconn, for example, have expanded or built new factories in Vietnam. The service industry, on the other hand, did not fare as well, particularly during the first Covid-19 Wave in Q2 2020. International tourism, which was formerly a vital aspect of Vietnam’s economy, has taken a severe hit. Certainly, the industry recovered and fared much better than most countries’ economies. However, in terms of growth rate, it continues to trail behind the Manufacturing sector.
The total breakdown of GDP by sector was also influenced by the differing growth rates. In Vietnam, the service industry remains the most important. However, the manufacturing sector now contributes roughly 7% more to the overall GDP of Vietnam than it did in Q2 2020. With greater investment, it demonstrates the sector’s strength. However, it also demonstrates that the service sector still has a lot of untapped potential.
RELATED: Quick Shift From Coal Plants: Boom in Vietnam’s Renewable Energy Industry
Unemployment Data in Vietnam in Light of Covid-19
Due to the Covid-19 pandemic, the unemployment rate increased in Q2 2020 but gradually decreased throughout 2020, ultimately peaking in Q1 2021. However, the first indication of the economic impact of the next Covid-19 wave is the unemployment rate in Q2 2021. It grew, although not as quickly as the GDP, unfortunately.
One intriguing fact regarding the unemployment rate is that it is higher for those who have completed higher education, particularly for students at colleges and universities. This is most likely related to the growth of numerous industries. Because the manufacturing sector was less affected, there was less need for redundancy in the service industry other than retail. Employees without any qualifications, on the other hand, were struck harder by redundancy as a result of the recent outbreak. The unemployment rate is likely to rise in Q3 as a result of the existing restrictions.
Moreover, the number of Vietnamese aged 15 and up said that the Covid-19 had a direct impact on them. This involved losing their job, having their working hours decreased, working alternative shifts, having their income lowered, and so on. The number was extremely high in 2020 and then substantially declined in the first half of 2021, in keeping with the growth. This statistic, like the unemployment rate, illustrates the initial impact of the latest Covid-19 Wave in Q2. For Q3, we anticipate a significant increase in this number.
Investments in Vietnam
Vietnam has seen a surge in investment over the previous few years. While Covid-19 had a significantly detrimental influence on this trend in Q2 2020, it began to pick up again later that year. This was especially true in the case of FDI, which saw its largest quarterly level in Q4 2020. The overall Foreign Direct Investment for 2020 was over US$20 billion in the end. This excellent figure demonstrated Vietnam’s growing importance as an investment destination.
FDI, on the other hand, is still not Vietnam’s primary source of investment. For example, the Vietnamese government’s state investment in infrastructure projects and Covid-support has expanded. Though Vietnamese non-state organizations were the primary source of investment, accounting for more than 40% of total investment.
Following a poor start in Q1 2021, it appears that investment levels in Q2 2021 have improved. However, it’s difficult to say how much and for how long the current scenario will affect Vietnam – and the problems that may arise for local businesses.
Export / Import in Vietnam
Over the previous few years, Vietnam’s economy has benefited from rising exports to become a preferred destination for many international manufacturers. Following the hiccup in Q2 2020, the export sector performed strongly and remained consistent, resulting in a trade surplus until Q1 2021. While there has been no impact on export volume so far, there has been a significant increase in imports, owing to increased requirements during the current restrictions. Lockdowns and factory closure regulations may result in a further drop in exports in Q3 2021, ultimately leading to a trade deficit. It all hinges on how long the restrictions on industrial parks in various areas across Vietnam will remain in place.
Vietnam’s Economic Forecast
Vietnam posted outstanding results, with a 6.61% GDP growth in Q2 2021. The current strength of Vietnam’s economy may be seen in the total GDP growth as well as the growth of particular sectors. It was also a continuation of the rebound from the extremely dismal second quarter of 2020.
The current 4th Covid-19 Wave, on the other hand, has a significant impact on Vietnam’s people and economy. With a variety of restrictions in place for cities and industrial parks, growth is expected to be slow. As a result of the unfavorable prognosis, the projection for 2021 has already been cut. There may be a further reduction depending on the length of the restrictions.
However, Vietnam has demonstrated that its economy can quickly rebound from the adverse impacts of the Covid-19 pandemic. With access to several free trade agreements and a young and educated population, Vietnam remains an alluring investment destination.
This article was researched by and published in partnership with RSP-INTERNATIONAL
How Can Cekindo help?
In Vietnam, investing or setting up a company entails a series of time-consuming and unduly formal procedures. Having company registration pros on your side, such as Cekindo, may save you a lot of time and make the process go smoothly. Cekindo offers a wide range of auxiliary services linked to business formation, including legal advice, license and document acquisition, tax and accounting, and HR services.