At the press conference, Mr. Andrew Jeffries, ADB Country Director for Vietnam, stated:
Vietnam's economy recovered faster than expected in the first half of 2022 and continued to grow despite global challenges, thanks to strong macroeconomic fundamentals supported by a quicker-than-anticipated rebound in the manufacturing and processing industries, as well as services. This trend persisted in the second half of 2022, driven by strong disbursement of foreign direct investment (FDI).
Domestic travel fully returned to normal, and the removal of COVID-19 travel restrictions for foreign visitors significantly boosted tourism recovery in the second half of 2022, serving as a growth engine for the services sector. ADB revised its forecast for Vietnam’s service sector growth in 2022 from the previous 5.5% to 6.6%, although still below the 7.3% growth recorded in 2019.
According to ADB's report, the State Bank of Vietnam (SBV) successfully maintained an accommodative yet flexible monetary policy, facilitating low-cost lending while keeping inflation in check. The SBV has kept policy rates unchanged since the last cut in October 2020 and expanded credit—estimated to have grown by 15.9% year-on-year by June 2022.
The SBV also carefully monitored credit flowing into high-risk sectors (such as real estate and equities). To ease inflationary pressures and support the Vietnamese đồng, the SBV absorbed excess liquidity—estimated at around VND 100 trillion in the first half of 2022—by selling central bank bills via open market operations. This helped slow the growth of the broad money supply to 9.2%, compared to 14.2% in the same period of 2021.
The SBV began mitigating the impact of a stronger U.S. dollar by selling about USD 7 billion in the first seven months of 2022 to stabilize the exchange rate, resulting in a modest 2% depreciation of the đồng against the USD—making the đồng more stable than other Southeast Asian currencies.
However, expansionary monetary policies—such as interest rate subsidies, debt restructuring, and loan term extensions without reclassifying loan groups—may delay the recognition of bad debts, which are projected to reach 5% of total outstanding loans in 2022. Additionally, efforts to stabilize the exchange rate to support trade may also place pressure on foreign exchange reserves.
Mr. Andrew Jeffries, ADB Country Director for Vietnam, stated that Vietnam’s economy recovered faster than expected in the first half of 2022 and continued to grow despite numerous global challenges.
Due to declining global demand for goods, inflation, and tighter financial conditions, Vietnam’s current account balance is forecasted to run a deficit of 1.5% of GDP in 2022 and 1.7% in 2023.
Although global geopolitical tensions and tighter financial conditions are expected to continue limiting FDI inflows in 2022, FDI disbursements will increase strongly as foreign investors remain confident and doing business in Vietnam has become easier.
The Government’s vigorous efforts to accelerate public investment disbursement, including through the implementation of the Economic Recovery and Development Program, will help offset the decline in exports caused by weakening global demand.
The budget deficit is projected to rise to 4% of GDP in 2022 due to continued price control measures, tax reductions, targeted budget support, and increased spending on social welfare, healthcare, and COVID-19 vaccination. However, public debt remains well managed, providing room for fiscal maneuvering. In 2021, public debt was estimated at 43.1% of GDP, well below the statutory ceiling of 60%. The country’s external debt is forecasted at 38.4% of GDP, within the legal limit of 45%. A strong fiscal position and low public debt have significantly supported Vietnam’s robust economic recovery.
Vietnam’s prudent monetary policy and effective implementation of price control measures for fuel, electricity, food, healthcare, and education are expected to help keep inflation at 3.8% in 2022 and 4.0% in 2023. Increased investment, controlled inflation, and expansionary fiscal and monetary conditions are expected to stimulate domestic consumption and bolster the ongoing economic recovery throughout 2022.
However, ADB experts also cautioned that risks to Vietnam’s economic outlook remain high. A global economic downturn could have a greater-than-expected negative impact on exports.
The COVID-19 pandemic could re-emerge, particularly given the health system’s limited readiness, with many healthcare workers recently resigning and shortages of medicines and medical equipment. Labor shortages could hinder the rapid recovery of the services sector and labor-intensive export industries in 2022.
“Delays in public investment disbursement and social spending, especially slower-than-planned implementation of the economic recovery and development program, could reduce growth rates this year and next,” the ADB report stated.
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