Vietnam economic growth and FDI data showed strong growth compared to the same period last year, the fourth wave remains a concern for the government and investors alike. Nevertheless, Vietnam’s market fundamentals remain strong, and as long as it can control the rise in cases, its economy and production will continue to rise in the medium term.
Vietnam economic growth: Perspectives
Following the news that Thailand-based Bank of Ayudhya has agreed to acquire SHB Finance from Saigon-Hanoi Commercial Joint Stock Bank in Vietnam.
Bank of Ayudhya is the fifth largest bank in Thailand by assets while SHB Finance is among the top 10 consumer finance companies in Vietnam. The acquisition will help Bank of Ayudhya gain a strong foothold in the Vietnamese consumer finance market as it seeks growth outside Thailand as a part of its ASEAN expansion plan.
Vietnam remains a prolific market in the ASEAN region. It was the best performing Southeast Asian country in 2020 without a single quarter of contraction despite the COVID-19 pandemic. The Vietnamese economy to grow by 8.5% in 2021 and grow at an annual average rate of 7.3% over the next three years (2021f – 2023f).
Moreover, Vietnam is a manageable risk nation ranked 65th out of 136 nations in the GCRI Q4 2020. The country’s risk score was 42.8 out of 100 according to the GCRI, placing it in the manageable risk nations band.
On the back of economic stability and decent risk score, Vietnam is attracting investments from several companies globally, including those from Thailand as well. And not only Bank of Ayudhya, other Thai banks are also eying expansion in Vietnam. In February 2021, another Thai bank, Kasikornbank Pcl announced plans to open a branch in Vietnam.
Vietnam economic growth figures continue on an upward trajectory
The latest figures by Vietnam’s Ministry of Planning and Investment (MPI) give an overview of Vietnam’s FDI performance in the first six months of 2021.
Vietnam economic growth figures improved from last year. As of June 20, 2021, foreign investment projects were estimated to disburse US$9.24 billion, an increase of 6.8 percent compared to the same period in 2020. As of June 20, 2021, total newly registered and paid-in capital by foreign investors reached US$15.2 billion equal, to 97.4 percent compared to the same period last year. Capital generated by FDI projects was estimated at US$9.24 billion, up by 6.8 percent over the same period last year.
Similar to last year, Asian countries represented the lion’s share of FDI into Vietnam. Singapore led the list, accounting for nearly 36.9 percent of total investment capital, a year-on-year increase of 3.6 percent. This was followed by Japan accounting for 16 percent and South Korea, accounting for nearly 13.4 percent, a year-on-year increase of 43.6 percent. China, Hong Kong, Taiwan, and other countries trailed the rest of the list. In terms of FDI projects, South Korea topped the list, followed by Japan, Singapore, Taiwan, and Hong Kong.
Major sectors attracting FDI
FDI was poured into 18 sectors; as with previous years, manufacturing and processing led with total investment capital of US$6.98 billion and accounting for 45.7 percent of total investment capital. This was followed by electricity production accounting for 35 percent and subsequently real estate, scientific and technological activities, and wholesale and retail trade.
Government encourages Vietnam economic growth
The government remains keen on helping businesses and those affected by the pandemic. It has delayed taxes and land fee rentals and introduced support policies for employers and employees. The government has announced a vaccine fund to inoculate 70 percent of its population by early 2022. While Vietnam has lagged behind its peers in terms of people vaccinated, inoculations are now rising with vaccine shipments arriving almost every week.
Takeaways
Despite facing many challenges and uncertainties, Vietnam’s performance in the first six months of 2021 demonstrates that the government and economy remain resilient. Although the current crisis is far from over, Vietnam will continue to reap the benefits of its early containment strategy as it continues to lead the way into post-COVID recovery. Fill in the form below should you have a plan to open company in Vietnam. We will be happy to provide you with professional advice and assistance.
