The World Bank has cut its growth forecast for Vietnam this year to 5.3 percent, due to surging Covid-19 infection in Q1 and economic slowdown in its major export markets.
This has been the second time the bank lowers its 2022 projection for the country. Last October it had expected a growth rate of 6.5 percent, lowered to 5.5 percent in January.
Vietnam’s GDP is expected to grow by 5.3 percent this year and stabilize at around 6.5 percent in a scenario with eased mobility restrictions domestically and internationally, it added to a report released Tuesday.
It forecasts the service sector to gradually recover during the year as consumer confidence is restored and tourism resumes from mid-2022 onward.
But manufacturing will grow at a slower pace mirroring moderating growth in Vietnam’s main export markets of the U.S., the European Union and China.
But it warned of the outlook of heightened risks from external economic shock, including the Russia-Ukraine conflict and new Covid-19 variants, slowing recovery of domestic demand, and labor shortage due to a surge in infections.
“Additional shocks could lead to a low case scenario where GDP grows 4 percent in 2022, recovering to 6 percent and 6.5 percent in 2023 and 2024, respectively”.
The World Bank recommended the Vietnamese government to deploy a strong fiscal policy support, and accommodative and prudent monetary policy.
It was also cautious about economic and human capital consequences of inequality, which was driven up by the pandemic and lockdowns between last May and September.
Vietnam’s economy grew by 2.6 percent last year, well below its pre-pandemic trend of 7 percent.