The country’s gross domestic product (GDP) in the third quarter rebounded 2.6% year on year, compared with 0.4% seen in the previous quarter, falling short of private sector economists’ expectations of 2.7% growth.
The recovery pace remains weak after the interruption from a temporary resurgence of COVID-19 cases in Da Nang city in late July, said the United Overseas Bank’s head of research Suan Teck Kin, adding the authorities have regained control of the situation and businesses activities are back on track; however, they are still below “normal”.
Maybank Kim Eng economists Linda Liu and Chua Hak Bin noted that Vietnam has escaped a recession amid the pandemic this year, but recovery has been dampened by the emergence of a "second wave".
Suan said while the worst of the impact from COVID-19 appears to be over, as is the case for other Asian countries, it is still "a long way" before Vietnam's economy could return to full capacity.
So far, data has shown an "anemic recovery" for the industrial and services sector, which account for more than 70% of Vietnam's economy, he said. At the same time, the services sector, which is heavily reliant on inbound tourism, has been hit by border closures around the world and could continue being in "a dismal state" for some time, he added.
He is expecting recovery to extend further in the fourth quarter, but with a restrained pace due to the ongoing pandemic, predicting a 4% growth in Q4 and for full-year expansion to come in at 2.8%.
Maybank Kim Eng economists lowered their forecast for the fourth quarter from 6% to 4.5%, and for full-year growth to come in at 2.9% instead of 3.6%, as the recovery momentum appears to be losing steam.
They said that the industry and construction sectors will continue to lead the recovery, while services will trail due to softer demand and the lack of a meaningful tourism recovery.
However, they said better recovery will be in the retail sales, which grew from 3.6% in August to 4.9% in September. This means non-tourism-related services are starting to catch up.
