According to the Vietnam Macroeconomic Update Report February 2022 of the World Bank (WB), many important economic indicators of Vietnam have increased sharply. This is a positive start signal for the economy in 2022.

According to the report of the World Bank, in January 2022, the Program on socio-economic recovery and development for the 2022 - 2023 period was promulgated by the Government. Accordingly, fiscal measures within the budget with a total size equivalent to about 4.5% of GDP were also reassessed. The program continues to extend the deadline for paying tax and land rent, reduce the value-added tax rate (VAT) by 2%, and add more public investment capital.

With the Government's economic support and recovery program, industrial production continued to grow, albeit at a slower rate and unevenly across sectors. The growth rate of the industrial production index decreased to 2.4% over the same period last year. The World Bank believes that this slowdown is mainly due to a decrease of 5.0% in the production of computers, electronics and optical products compared to the growth rate of 15.6% in December 2021.

Meanwhile, the production of metal products, metal products, apparel and footwear achieved a growth rate of over 10% over the same period last year. According to the WB, the above two opposite trends are mainly led by the demand from the external economic sector because the export turnover of these items also shows the same trend.

At the same time, differences in labor shortages in each industry may also be a contributing factor. Specifically, at the beginning of January 2022, the number of employees working in enterprises producing computers, electronics and optical products decreased by 1.7% compared to the same period last year, while the number of employees in the garment and footwear industries has reached or even exceeded the levels a year earlier.

The report also shows that the Purchasing Managers Index (PMI) of the processing and manufacturing industry has increased markedly from 52.5% in December 2021 to 53.7%, the highest level since May 2021, showing that business conditions have improved significantly.

Notably, the total retail sales of consumer goods and services recorded positive growth. Total retail sales of consumer goods and services in January 2022 increased by 6.7% compared to December 2021 and increased by 1.3% over the same period last year.

Although exports decelerated and growth slowed, the balance of trade in goods still with a surplus of USD 1.4 billion. In January 2022, merchandise export growth slowed down to 8.1% over the same period in 2021. Meanwhile, import growth remained steady at 11.3% over the same period last year.

Vietnam continues to be a destination that attracts foreign investment with USD 2.1 billion  of registered FDI capital in January 2022, an increase of 4.2% over the same period in 2021. The above increase is due to large projects adjusted to increase investment capital, especially in the electronics industry and active mergers and acquisitions (M&A) activities.

The WB also noted that inflation is still under control. The consumer price index (CPI) in January 2022 increased by 1.9% over the same period in 2021, equivalent to the rate recorded at the end of last year. The increase in consumer prices was mainly due to an increase in energy prices, which pushed up the cost of housing and transportation. Food and foodstuff prices remained relatively stable while core inflation (excluding prices of food, foodstuffs, energy and other valuable items managed by the State) increased by 0.7% over the same period in 2021.

In addition, credit in January grew faster to meet the increased demand before Tet from businesses and households, causing overnight interest rates in the interbank market to increase sharply.

Kylie Nguyen