The Vietnamese economy is projected to post stronger growth in the second quarter of 2022 but also faces numerous challenges, especially the pressure of inflation.

According to General Statistics Office (GSO), the economy expanded by 5.03% during the January-March period. The figure was lower than the 6.85% rate recorded in the same quarter of 2019 before the onset of the pandemic but higher than the rates of 3.66% and 4.72% seen in the first quarters of 2020 and 2021.

It is notable that along with the main growth driver of manufacturing, most other economic sectors also witnessed a rebound. Manufacturing rose by 7.79% thanks to the impressive growth of electronic products, cars and steel. Mining also posted a positive increase after a long period of negative growth. New companies and those returning to business soared by 36.7%, raising the total capital injected into the economy by 21%.

In the first quarter, Vietnam’s total trade value reached 176.35 billion USD, up 14.4%, in which exports rose 12.9% and imports rose 15.9%. The country posted a trade surplus of 809 million USD. Commerce and services witnessed a marked recovery after two years of a downturn due to COVID-19. International arrivals increased sharply following the full tourism opening and the resumption of international flights.

Despite facing escalating global prices of raw materials and fuels, as well as the impacts of the Russia-Ukraine conflict, Vietnam’s inflation in the first quarter was bucking the global trend. GSO data showed Vietnam’s consumer price index (CPI) during the first three months of 2022 rose by 1.92% while core inflation went up 0.81%.

Explaining Vietnam’s success in containing inflation, analysts said there are differences in the basket of goods and services used to calculate the CPI in each country. The baskets of the US and many European countries are heavily weighted by electricity and gas, so their economy is severely hit by rises in fuel prices. In the meantime, foods, which account for 28% of Vietnam’s CPI basket, always have abundant supplies. Furthermore, the government’s aggressive actions in regulating fuel prices have kept domestic prices in check.

But the GSO warns that unlike in previous years, the March CPI rose to the highest level since 2012, while the prices of materials for production also rose to ten-year highs. The inflationary pressure will weigh on the remaining quarters due to the impact of Vietnam’s economic recovery and the risk of imported inflation, making the target of keeping inflation at around 4% extremely challenging.

In the GSO’s calculations, Vietnam’s economy is forecast to grow stronger in the second quarter and full-year growth may still be able to reach 6-6.5% as set out in a government resolution on measures to implement the socio-economic plan for 2022. However, the target of 6.5% will be a great challenge.

The GSO suggests that the government should persist in maintaining macroeconomic stability, keep prices in check, ensure the supply and circulation of goods, and take measures to minimise price surges to reduce the impact on inflation and people’s lives.

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