Vietnam economy had a rough year, with big stumbling blocks in the stock, real estate, and corporate bond markets. However, it is predicted to conclude 2022 on a high note as a result of increases in many fields.
1. Vietnam economy has GDP Growth to Lead Asia Pacific
Despite severe economic hurdles, Vietnam's GDP growth’s expected to exceed 8% this year, the highest among major Asian Pacific countries.
Vietnam's GDP grew by 8.83% in the first nine months of the year, the most in the period 2011-2022, due to a 13.67% leap in the third quarter.
During this time, the services sector increased by almost 10.57%, accounting for more than half of the total growth. Industry and construction expanded by more than 9.44%, accounting for the majority of the remaining growth. Agriculture, forestry, and aquaculture all increased by 2.99%.
The government anticipates 8% growth for the year, whereas HSBC predicts 7.6% and the World Bank predicts 7.2%.
According to Prime Minister Pham Minh Chinh, the Vietnam economy exhibited strong development in several areas in the first nine months, with 14 out of 15 objectives met or even surpassed.
2. Trade surpluses increase from a low foundation in Covid-19
Vietnam economy achieved a surplus of $10.6 billion in the first 11 months of the year, thanks to increased exports. This marked a rise compared to the $0.6 billion surplus recorded during the same period in the previous year.
After two influenza years, a comeback in economic activity bolstered exports, with the 35 largest trade categories reaching $1 billion. Ten of them were worth more than $10 billion.
The United States remained the largest export market, with $101.5 billion, up 18% year on year, while China was the largest import market, with roughly $109 billion, up 9% year on year.
3. FDI climbs to 5-year high
Disbursed foreign direct investment increased 15.1% year on year to $19.68 billion in the first 11 months, the largest rise in five years.
Investors from 107 countries and territories flocked to the country, and Singapore took the lead with a $5.78 billion investment, comprising 23% of the total. Japan, South Korea, and China followed suit.
Ho Chi Minh City accounted for 14% of the newly registered capital, with Binh Duong and Quang Ninh following.
At $14.96 billion, processing and manufacturing topped FDI, followed by property and energy production and distribution.
"Vietnam economy has repeatedly proven its ability to climb up the value chain over the years, to the point where the country has grown into a key manufacturing hub for tech products within the electronics space," Tim Evans, CEO of HSBC Vietnam, told VnExpress foreign.
Multinational corporations are gradually flocking to the country. Lego commenced the construction of a $1 billion facility in November. In the same period, Foxconn, an Apple supplier, secured a 50.5-hectare property lease in Bac Giang Province for a $300 million factory employing 30,000 individuals.
4. Turbulence in the stock market
Vietnam's stock market had a turbulent year, with several global and internal issues sending the benchmark VN-Index on a roller coaster ride.
Starting the year strong, the market saw the VN-Index soar to a record-breaking 1,528 points in early January. This upward trend was fueled by the growing momentum that originated in April 2020.
After remaining stagnant, the market took a downward turn in April due to Russia-Ukraine tensions and disrupted supply chains. Additionally, rising inflation in key nations like the United States and Europe further dampened investor sentiment.
The arrests of numerous company executives in the second quarter on allegations of stock manipulation and bond fraud drove down real estate stocks, sending the market down in June and July. The market dropped to approximately 1,150 points before recovering in August.
As global organizations projected prolonged inflation and economic downturn, the index continued its decline, hitting a low of around 900 points in November. This marked the first time since October 2021 that the index reached such levels.
Benefiting from consistent net purchases by foreign investors in November and December, the VN-Index rebounded to approximately 1,050 points. Additionally, the State Bank of Vietnam's decision to raise the credit limit for commercial banks further encouraged lending and supported the market recovery.
5. Property market stalled by cash crunch
Vietnam's property market exploded at the start of the year as speculators raced to Hanoi, Ho Chi Minh City, Binh Duong, Dong Nai, and other cities to trade land and homes, boosting profits to double-digit increases within months.
Fear of inflation and low bank deposit interest rates led investors to resort to property as a haven asset in the first quarter, as demand for property was predicted to rise.
"The Russia-Ukraine tension, Covid-19, inflation, and business challenges are encouraging stock investors to seek out less risky assets," said property specialist Phan Cong Chanh.
The sunny earnings picture, however, began to fade in the second part of the year, when property developers struggled to acquire loans from banks since their credit quotas for the year were virtually exhausted. To keep inflation under check, the central bank kept the quota at 14%.
Bond issuance remained tough as the government intensified its campaign on market irregularities, with executives from Tan Hoang Minh Group and Van Thinh Phat Holdings Group jailed for alleged issuance fraud.
According to property consultancy Savills Vietnam, the third-quarter apartment absorption rate in Ho Chi Minh City was 15%, the lowest since 2019, while unsold inventories surged to a four-year high of 66% of primary supply.
According to Minister of Construction Nguyen Thanh Nghi, challenges in the property market will likely linger as supply fails to meet demand and lending restrictions remain restrictive. Furthermore, industry sources predict that the market slump will persist into next year.
6. The corporate bond market is experiencing a confidence crisis
This year, corporate bonds, which have been a crucial source of capital for firms, faced significant obstacles. Irregularities were revealed among prominent property developers, impacting the credibility of this capital mobilization avenue.
Tan Hoang Minh Group, a large luxury apartment developer located in Hanoi, had its chairman and five executives detained in April for suspected fraud in nine bond issuances totaling VND10 trillion ($414.18 million).
Truong My Lan, the chairperson of Van Thinh Phat Holdings Group, was detained in October for alleged fraud in the issuing and trading of bonds worth trillions of Vietnamese dong.
The arrests sparked a flood of bond buybacks from issuers. According to the Ministry of Finance, the value of corporate bond buybacks had increased 14% year on year to VND161 trillion as of November 25.
"Corporations are buying back bonds they issued before maturity, demonstrating the market's difficulty," stated Nguyen Duc Chi, Deputy Minister of Finance. "Falling confidence has had a significant impact on the corporate bond market."
He believes that restoring investor confidence is the most pressing challenge and that the bond market will expand sustainably in the long run.
7. Gasoline shortage upends life
Queues of people could be observed at petrol stations in Hanoi and Ho Chi Minh City from early morning until late at night in mid-November, as the country faced a serious fuel crisis.
Due to inadequate supplies, hundreds of petrol stations in major cities closed or reduced sales in October and November.
Retailers expressed that they had been experiencing prolonged losses as the government-controlled retail price failed to account for escalating costs. Concurrently, officials denied supply shortages despite customers having to wait in queues for half an hour to purchase fuel.
Businesses in the gasoline supply chain blamed "problematic" management on the Ministries of Industry and Trade and Finance, claiming that the more they sold, the greater their loss.
"Retailers are at the end of the supply chain, but we cannot set our commission and must rely on the generosity of suppliers," 36 Ho Chi Minh City gasoline merchants said in a letter to Prime Minister Pham Minh Chinh.
Chinh urged government agencies to address the issue promptly, instructing them to include transportation costs in fuel retail prices. Additionally, he directed the central bank to provide suppliers with easier access to credit to facilitate additional petroleum imports.
8. The dollar shoots up against the dong
Heightened global economic uncertainty and inflationary pressures led to the US dollar surging to a new peak against the dong. On October 26, at Vietcombank, the exchange rate reached VND24,888 to $1, marking an 8.59% year-to-date increase.
The dollar stayed strong until the end of November when it began to fall. The currency rate is presently about VND24,060 to one US dollar, up 4.97% since the start of the year.
The US Dollar Index, which measures the dollar's strength against major currencies, hit a historic two-decade high of around 114 points by the end of September. This significant milestone was observed on a global scale.
Vietnamese exporters benefit from the stronger dollar as it boosts their profits. However, it leads to increased expenditures due to the need to import from countries with currencies depreciating against the dollar.
"In the long run, if we need to borrow more in dollars, our revenues could be negatively affected by the exchange rate," said Pham Hong Phu, CEO of Casumina, a rubber firm that imports 40% of its raw materials.
9. Wrapping It Up
Here is a brief overview of Vietnam economy last year. Finally, visit this site and leave your thoughts if possible.
Source: Internet
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