Vietnam is poised to come out of the COVID-19 pandemic strong and put itself firmly on the radar of foreign investors, buoyed by rapid industrialization and a burgeoning middle class, experts told AsianInvestor, which focuses on the region’s investment industry.
According to a recently posted article, the optimism is based on the strong economic foundation built over a decade of steady GDP growth averaging 6 percent a year through 2019. Despite the pandemic setbacks in the past two years, new threats and inflation, the outlook is positive, experts said.
The World Bank predicts that Vietnam’s economy will grow by 5.5 percent in 2022, while the IMF expects a higher 6.6 percent, from 2.6 percent in 2021.
Speaking to AsianInvestor, Jason Ng, CEO of VCG Partners, predicted that Vietnam’s GDP could grow by more than 7 percent this year with the upturn in consumption, expects the country to fully reopen to foreign tourists and the recently approved stimulus package.
VCG is the Singaporean subsidiary of VinaCapital, one of the leading investment management companies in Vietnam.
The Vietnamese government approved a USD 15.3 billion stimulus package to help local businesses and workers affected by the pandemic.
The article continued that one of the main economic drivers is industrialization, driven by foreign direct investment (FDI) that has not slowed significantly despite the pandemic disruptions.
According to the World Bank, about USD 15.8 billion of foreign capital flowed into the country in 2020, slightly less than USD 16.1 billion in the previous year. The official 2021 figure is expected to be in the same range as investors are attracted by Vietnam’s cheap labor, a young and well-educated workforce, stable currency and generous corporate tax incentives.
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Vietnam has signed a plethora of free trade agreements with the US, the European Union, China, Japan, the Republic of Korea and ASEAN, strengthening its position as a manufacturing and export hub, the article points out.
Another important driver is the increase in domestic consumption. The wave of foreign investment in recent years has created jobs and a vibrant middle class, as well as many local small and medium-sized business owners who have become suppliers to the major manufacturers.
The rise of the middle class – those who earn $700 a month – will boost domestic consumption.
“The young middle class is digitally savvy, so e-commerce and its supporting distribution and logistics sectors are expected to benefit,” Ng said, adding that financial services, housing, digital technology and green products are potential investment opportunities.
The biggest current risks for foreign investors are the revival of inflation and the possible depreciation of the Vietnamese Dong against the US dollar.
Still, Vietnam, which has more than $100 billion in foreign reserves and a healthy trade surplus, could hold its own, the expert said.