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ADB upbeat on Vietnamese economic recovery post COVID-19 pandemic
The Vietnamese economy has recorded an impressive recovery over the past nine months, and the Asian Development Bank (ADB) is confident of the country’s bright prospects for its medium- and long-term growth.
According to Nguyen Minh Cuong, chief economist of ADB Vietnam, this strong recovery comes from the country’s stable macroeconomic background, political stability, as well as success in COVID-19 control, all of which has contributed to fueling economic growth.
The spectacular performance of the local economy can therefore be seen across all growth engines, from industry, agriculture to services, and exports. It is noteworthy that both local and foreign investors have maintained their trust in the Government’s development policies and orientations.
However, the ADB expert pointed out that the biggest risk to the Vietnamese economy is the impact of external factors that becoming increasingly apparent.
Recent decisions made by developed countries to raise interest rates in order curb the impact of inflation have exerted a strong impact on growth, thereby having a knock-on effect on capital markets and on developing economies. Despite inflation being lower in Southeast Asia, including Vietnam, the inflation rate is likely to rise, and the risk of imported inflation is huge.
Amid the appreciation of the US dollar, the State Bank of Vietnam has decided to raise the deposit and lending rates, and widen the exchange rate band from ±3% to ±5%.
Cuong therefore hailed the bank’s moves as being completely appropriate and contributing to stabilising macro conditions for medium- and long-term growth.
According to the expert’s analysis, the VND is in the process of depreciating its value against the US dollar, a factor which will certainly impact import and export activities. This depreciation trend is likely to increase moving forward, however, Vietnam still yielded a trade surplus of US$8 billion as of mid-October.
The country needs therefore competently manage its foreign exchange and banking markets following lessons learnt from the 2008 – 2010 crisis in order to avoid putting too much pressure on monetary policy, said the ADB expert.
The most important thing is that the confidence of foreign investors and people is still increasing and Vietnam’s adopted measures are proving effective, he added.
In its latest economic outlook, the Asian Development Bank anticipates the Vietnamese economy is likely to expand by 6.5% this year and 6.7% next year.
Source: VOV