In its fresh report on the economic outlook of Southeast Asia released over a week ago, global analyst FocusEconomics forecast that thanks to strong recovery in industrial production – in addition to that of many other sectors, the Vietnamese economy will see the highest growth rate of 7.5% this year among all regional nations, followed by Malaysia (7.2%), the Philippines (6.6%), Indonesia (5.2%), Cambodia (5.1%), Singapore (3.5%), Thailand (3.3%), Laos (3%), and Brunei (2.5%), and the whole ASEAN (5.2%).
“Vietnam will likely continue to be ASEAN’s top performer in 2023, benefiting from strong investment and private spending. Major companies relocating production from China to Taiwan, a large base of trade agreements and the revival in tourism will contribute to activity,” FocusEconomics said. “Nevertheless, weakening global demand will weigh on industry and exports, clouding the outlook. Our panelists expect GDP to expand 6.3% in 2023, which is down 0.1 percentage points from last month’s forecast, and 6.6% in 2024.”
According to FocusEconomics’ calculations, Vietnam’s industrial output grew 25.9% compared to the same month of the previous year in September, which was a deterioration from August’s 27.2% increase. The figure was partly driven by slower manufacturing production growth. In contrast, electricity output rebounded.
Meanwhile, annual average industrial production growth rose to 13.5% in September (August: +10.5%). This signals an improving trend in the industrial sector.
Industrial expansion
Figures from the General Statistics Office (GSO) also showed a positive landscape in Vietnam’s industrial production. The GSO has said that in October 2021, Vietnam’s index for industrial production (IIP) is estimated to climb 3% on-month and 6.3% year-on-year “on the back of businesses taking the bigger initiative in labour and formulating their business and production plans, and overcoming snags for further production recovery and expansion.”
In the first 10 months of 2022, the IIP expanded 9% year-on-year – far higher than the year-on-year rise of 3.8% in the same period last year. In which the manufacturing and processing sector advanced 9.6% year-on-year – higher than the 5.1% year-on-year expansion in the corresponding period of 2021.
National Assembly (NA) deputy Nguyen Thi Thu Nguyet representing the Central Highlands province of Dak Lak said that the expansion in industrial production and the economy’s recovery have “come from the government doing a good job in macroeconomic monitoring, with many positive results.”
“I feel happy with these results, with a strong rebound in industrial production. The economy has bouncing back after two years of decline. After many years, the economy has grown at a rate of 13.67% exceeding the set plan, with the macroeconomic situation continuing to be kept stable,” Nguyet said.
Echoing this view, NA deputy Nguyen Anh Tri representing Hanoi also said that businesses’ confidence into the economy is on the rise, with industrial production driven towards an uptrend.
“Vietnam has effectively brought COVID-19 under control, making it quite favourable for the economy to grow amid numerous difficulties,” Tri said.
Growing demands for vital inputs
A closer look at the industrial situation has showed that expansion in production has led to growing demand for electricity and fuel – the vital inputs for the economy, and for wastewater treatment as well.
The Ministry of Planning and Investment reported that the economy’s production and distribution of electricity in the first 10 months expanded 7.8% as compared to the same period last year, while the management and treatment of wastewater went up by 6.6% year-on-year, and mining climbed 5%.
For example, state-owned Vietnam National Coal and Mineral Industries Group (Vinacomin) has reported that in the first nine months of 2022, its total revenue is estimated to sit at 5.28 billion USD, an year-on-year increase of 22.2%. This embraces an year-on-year expansion in revenues of a number of major products like coal (3.2 billion USD - up 24%), minerals (806.5 million USD, 44.8%), mechanical production (121.3 million USD, 23%), industrial explosive materials (226.5 million USD, 27.5%), and other products (584.8 million USD, 13%).
In another case, state-run Vietnam Oil and Gas Group (PetroVietnam) has also reported that its total revenue in the first nine months of this year is estimated to reach 30.36 billion USD, surpassing by about 25% in comparison with to the yearly plan and increasing 56% year-on-year. PetroVietnam’s total revenue from electricity sales is estimated to stand at 14.87 billion USD, an year-on-year climb of 9.04%.
In the first nine months of 2022, PetroVietnam also exploited 8.15 million tonnes of crude oil – surpassing by 23% as compared to the initial plan and tantamount to the realised volume last year. PetroVietnam’s 9-month production of nitrate exceeded by 9% against the initial plan and up 7% year-on-year.
Meanwhile, state-owned Electricity of Vietnam (EVN) also announced that its gross output of industry is estimated to reach 12.87 billion USD in this period, up 7.1%, while the produced and purchased electricity volume was close to 197.91 million kWh, up 6.81%; and commercial electricity hit 181.49 million kWh, up 7.1%. EVN’s total revenue earned from electricity sales is estimated to reach 14.87 billion USD, an year-on-year expansion of 9.04%.
It has been expected that the performance of Vinacomin, PetroVietnam, and EVN in the fourth quarter of the year will continue flourishing thanks to domestic production strongly bouncing back, with rising demands for these types of vital inputs for production and businesses activities.
Confidence growing
FocusEconomics Consensus has estimated that Vietnam’s industrial output will grow 8% in 2023, and also the same rate in 2024.
The GSO said that in the first 10 months, enterprises’ confidence kept rising. Specifically, there have been 125,800 enterprises newly established, registered at 58.26 billion USD and employed 835,000 people – up 34.3% in the number of businesses, 5.7% in capital, and 18% in labourers, all as compared to those in the corresponding period last year.
In October, the entire economy witnessed over 13,000 enterprises newly established, up 58.3% year-on-year. In the first 10 months of 2022, the total number of enterprises registered for new establishment and resuming operation hit 178,500, up 38.3% year-on-year, of which the number of businesses returning to operation increased by 49%.
If the 121.74 billion USD worth of additional registered capital of 42,600 already-running businesses is taken into account, the total amount of additional registered capital into the economy in the first 10 months of 2022 has reached 181.3 billion USD, up 31.1%.
According to FocusEconomics, looking ahead, quarterly on-year growth is set to slow sharply in the fourth quarter as the base effect grows less favourable, before accelerating again slightly in 2023. While slowing global demand will be a drag on exports and recent monetary policy tightening poses a risk to domestic activity, a recovering tourism sector and the country’s attractiveness as a manufacturing base for foreign firms will support growth going forward.
On the outlook for the external sector, analysts from the Economist Intelligence Unit (EIU) commented, “EIU believes that a continuing expansion of export-oriented manufacturing will underpin economic growth in 2023, but downturns in major destination markets will limit the speed at which the economy expands, even as Vietnam continues to increase its share of global exports.”
Meanwhile, FocusEconomics panelists expect Vietnam’s GDP to expand 6.3% in 2023 and 6.6% in 2024. The Vietnamese government has also set a growth target of 6.5% next year, lower than an expected 8% for this year.
