SWOT analysis of VietNam economy in 2021
- QTH-3Q-19 Bui Hong Hanh
- Mar 31, 2022
- 9 min read
Updated: Apr 12, 2022
The COVID-19 pandemic was complicated globally in 2021 by new variants, impending global economic recovery. Vietnam was one of the countries hardest hit by the epidemic; the country's economic growth in 2021 was only 2.58 percent, the lowest in the previous 30 years. As a result, in order to return to a development trajectory, Vietnam must implement a durable economic recovery program with the appropriate dose, aim, and enforcement institutions.
Vietnam's economic context
According to the General Statistics Office, the gross domestic product (GDP) in 2021 is expected to grow 2.58 percent over the same time in 2020. In the first quarter, it will increase by 4.72 percent; in the second quarter, it will increase by 6.73 percent; in the third quarter, it will fall by 6.02 percent; and in the fourth quarter, it will increase by 5.22 percent. In the context that the COVID-19 epidemic has seriously affected all areas of the economy, this is a great success for Vietnam in disease prevention and maintenance of production and business.
Strengths
To begin with, the swift recovery of the economy prior to and during the fourth epidemic demonstrates the market's energy as well as the adaptability and ingenuity of enterprises. The economy benefited in the first six months of 2021, when the growth rate of several localities was fairly high; GDP growth in the first quarter of 2021 reached 4.72 percent, and 6.73 percent in the second quarter of 2021. When the virus was well contained, economic growth returned quickly in the fourth quarter of 2021, with GDP growth estimated at 5.22 percent (higher than the growth rate of 4.61 percent in the fourth quarter of 2020). The economy's swift recovery between the two epidemics demonstrated its inherent strength and development potential.
Second, the ability of Vietnamese enterprises to deal with the pandemic's severe conditions is the high point of Vietnam's economic picture in 2021. During the fourth COVID-19 outbreak, Vietnamese enterprises Nam took on the weight of helping the people, maintaining social security, and fighting the disease while still keeping workers and sticking to production in a variety of inventive approaches. Many businesspeople also remark on and criticize policies with authorities at all levels in the implementation of economic development under the "new normal" conditions. By the end of 2021, Vietnam's economy had shown signs of improvement, including: Goods export turnover is anticipated to be 336.25 billion USD, up 19% from 2020. The economy received 116,800 newly founded registered enterprises, and 43,100 enterprises returned to operation, bringing the total number of newly established enterprises and enterprises returning to operation to nearly 160,000 in 2021. In particular, in November 2021 alone, the number of newly registered enterprises increased significantly compared to the previous month in terms of the number of enterprises (up 44.6%), registered capital (up 38%) and number of employees (up 38%) up 30.2%). The number of businesses returning to operation increased by 15.2% over the previous month.
Thirdly, in 2021, The total import and export value of goods nationally in December reached 66.21 billion USD, up 6% from the previous month, according to preliminary statistics from the General Department of Customs. Exports totaled 34.59 billion USD, up 8.5 percent from the previous month (equal to 2.7 billion USD); imports totaled $31.62 billion, up 3.1 percent (equivalent to a more than $1 billion rise). For the entire year 2021, the country's overall import-export value reached $668.55 billion, a 22.6 percent increase over the previous year, or $123.23 billion. In which the value of exported goods increased by 19%, equating to an increase of USD 53.68 billion, and imports increased by 26.5 percent, corresponding to an increase of USD 69.54 billion. The month's trade balance of goods was 2.97 billion USD in surplus. The country's merchandise trade balance will be $4.08 billion in surplus for the entire year of 2021. According to General Department of Customs calculations, the trade balance of goods of FDI businesses was 3.42 billion USD in December 2021, bringing the trade balance in 2021 to a surplus of 27.01 billion USD.
Another great spot is the capacity to control inflation and maintain macroeconomic stability. Along with the global economic recovery, commodity prices on the global market, particularly for major inputs such as gasoline, have risen significantly. According to Economist Intelligence Unit estimates, oil prices will have grown by 66.4 percent by December 15, 2021, compared to 2020. The USD Index climbed by 6.78 percent as well (at the end of 2021 compared to the end of 2020). In that setting, sustaining stable inflation at 1.84 percent, much lower than the established target (below 4 percent), assisted in easing people's lives while also creating more room for interest rate control to support the business community.
Weaknesses
In 2021, countries around the world, including Vietnam, will have to deal with new strains of the SARS-CoV-2 virus with a faster and more hazardous spread, resulting in economic loss, a weakened health system, and a threat to people's health.
In Vietnam, the COVID-19 epidemic is still causing very complicated and unpredictable outcomes. The fourth outbreak of the epidemic, which began on April 27, 2021, has had a serious impact on all aspects of socioeconomic life, production, and business activities of enterprises and people as it spread to most provinces and cities, particularly in major cities and provinces such as Ho Chi Minh City. Ho Chi Minh City, Hanoi, Bac Giang, Bac Ninh, Binh Duong, Dong Nai, and other densely populated cities, industrial parks, and large firms in the global value chain all contribute significantly to business development, the economy, and government revenue.
Our country's GDP growth rate in the first six months of 2021 was just 5.64 percent, which was lower than the target. Although it has greatly improved over the same period in 2020 (1.82 percent), it has not yet restored the growth rate seen in 2018 and 2019 (7.05 percent and 6.77 percent ). Attracting development investment money from the non-state and FDI sectors is challenging. Non-state sector investment climbed by 3.1 percent in 2020 and 7.4 percent in the first six months of 2021 over the same period. Total foreign investment capital into Vietnam declined by 25% in 2020 compared to 2019, and by 2.6 percent in the first six months of 2021. Furthermore, the unemployment and underemployment rates are rising. The unemployment rate and underemployment rate of workers were 2.4 percent and 2.6 percent, respectively, in the second quarter of 2021, both increasing from the first quarter of 2021 (2.19 percent and 2.2 percent).
The business situation was fraught with difficulties. The number of newly established enterprises increased by 0.8 percent in the first seven months of 2021 compared to the same period in 2020, a low level compared to the average growth rate of 8.1 percent in the 2016-2020 period; the number of enterprises suspending business for an indefinite period of time, waiting for dissolution procedures, and completing dissolution procedures increased by 25.5 percent in the same period in 2020. In terms of enterprise size, the impact is felt on a large scale, most notably with micro and small businesses. Production and business activities of cooperatives, cooperative unions, and cooperative groupings (cooperatives) were severely harmed. More than 90% of cooperatives reduced their revenue and profit; Employees who are fired or quit without pay account for more than half of the total number of employees.
Opportunities
In 2022, Vietnam's economy will have a plethora of new prospects to recover.
To begin, in comparison to 2021, Vietnam will see significant improvements in both the dynamics and outcomes of economic recovery and development. The ability to cope with the epidemic will improve as experience, capacity, and ability to cope with the pandemic improve. Producing a vaccine against Covid-19 in advance will ensure that the goal of vaccination of the entire population is met, the country will swiftly return to normal, and the economy will recover quickly. One of the criteria for economic recovery and development is the completion of vaccination coverage by the end of 2021, or by early 2022 at the latest.
Secondly, the direct impact of economic assistance packages is increased. Vietnam must strengthen its resilience by establishing a robust and flexible social assistance system based on allocating additional capital to social assistance programs; developing a large-scale social registry and digital adoption to quickly identify vulnerable people; and scaling up electronic payments to effectively reach identified beneficiaries. The government has set the ultimate objective of "safely adapting, flexibly, and successfully regulating the Covid-19 epidemic, preserving people's health and life to the greatest extent possible," as well as "making excellent use of all available resources." With comprehensive solutions, society may foster socioeconomic recovery and progress." Continue to preserve macroeconomic stability, develop the economy's autonomy, resilience, and adaptability; aim for a 6-6.5 percent increase in GDP, an average CPI growth rate of approximately 4 percent, and a state budget deficit of roughly 4 percent of GDP for the entire year 2022.
Despite the COVID-19 outbreak, domestic investment surged, the private economy expanded, and state investment increased rapidly. Foreign investment capital, in particular, is very big, amounting to more than 25 billion USD, or roughly the same amount as last year. In 2021, the number of disbursements increased dramatically, similar to 2021. This demonstrates that our country's investment environment has always been valued by both domestic and foreign investors.
The business community is dynamic, and it strongly believes in the flexible and effective administration of the government, localities, and the country's economic prospects. The business sector has been looking for new product consuming markets. Some significant industries and key industrial items are seeing rapid expansion.
According to Assoc. Prof. Dr. Dinh Trong Thinh, this year's budget deficit is approximately 4%, while the bumper may be approximately 3.9 percent, both within the parameters set by the National Assembly and the Government. Inflation has recently been quite low, hovering about 2%. The Vietnamese dong may rise by 2% versus the US dollar this year, but it will fall by the same amount when compared to other currencies in the region. However, from a macroeconomic standpoint, this is positive.
Vietnam's foreign exchange reserves have climbed to over 110 billion USD, which is a very large figure. As a result, the economy's huge macroeconomic balance is reasonably stable, and it also serves as a foundation for development in 2022.
Threats
In general, the 2022 economic recovery process will face numerous obstacles, bottlenecks, and bottlenecks that must be handled. Vietnam continues to face rising inflationary pressures, a public debt ceiling and bank bad debt, and constraints on its ability to meet the needs of the grassroots health system in terms of human resources, equipment, and infrastructure. When it comes to the amount of persons who want medical help, social security is fairly large. Financial issues and the consuming market may impede the rehabilitation of production and business. The credit-to-GDP ratio is high, and the economy's medium and long-term capital remains mostly dependent on the banking system.
Firstly, the COVID-19 outbreak has generated problems not only economically but also socially. In the first 11 months of 2021, there are 106.5 thousand enterprises temporarily suspending operations; of these, 54.4 thousand enterprises withdrew from the economy, accounting for 51.5 percent of newly established enterprises; this reflects that the business sector, which plays an important role in economic growth, problem solving, and job creation, has been severely harmed by global and domestic economic difficulties.
Secondly, following the motto "people's lives come first," the extended social separation has disturbed the network of products and labor circulation. The economy is at risk of supply chain interruptions and economic stagnation after the fourth COVID-19 epidemic triggered social distance in the two main cities. Specifically, the challenges of labor resource disruption due to distance, raw material source when fees are excessive, and the scenario of preventing mobility between regions and localities. In 11 months, total retail sales of consumer goods and services fell by 10.4 percent, adversely hurting the economy's growth forecast.
The sluggish disbursement of public investment funding is the next point to mention. The whole development investment capital plan in 2021 is funded by the province budget and the central government's support totaling 3,330,340 million dong, according to Prime Minister's Decision 2185 on the assignment of the state budget investment plan in 2021. Over 2,734,900 million VND had been disbursed as of January 31, 2022, representing 81.52 percent of the goal. Specifically, each investment money is disbursed as follows: The proposed provincial budget capital in 2021 is 2,223,150 million VND, with 1,907,667 million VND released by January 31, 2022, representing 85.80 percent of the capital plan; disbursed target support is 709,134/842,424 million dong, or 84.18 percent of the plan; foreign capital (ODA and concessional loans from foreign donors) disbursed 98,102/264,774 million VND, reaching 37.05% of the plan.
Although export turnover reached an impressive 299.67 billion USD, up 17.5 percent over the same period in 2020, domestic economic sector export turnover only reached nearly 79 billion USD, accounting for 26.4 percent of total export turnover and increasing only 11.1 percent compared to the FDI sector's 20 percent increase. The supporting economy and the link between the domestic and FDI sectors remain weak and shaky.
Despite many problems and challenges, particularly the impact of the Covid-19 epidemic, the agriculture and fishery industry had very favorable results in 2021, not only meeting and exceeding the planned growth targets but also continuing to play the role of the economy's "support." However, in 2021, these two industries will confront numerous problems. Prices of agricultural supplies and feed for livestock and aquaculture have risen; diseases in pig and poultry production have become more complicated; market demand has not recovered, and output prices of agricultural and aquatic products have fallen, causing farmers to lose money.
Last but not least, many firms are currently experiencing challenges in the manufacture and distribution of goods. Commodity prices will rise as a result, putting pressure on the economy's inflation. The consumer price index is lower than the aim of 4% this year due to a substantial reduction in aggregate demand in the economy. However, the inflationary pressures of 2022 are also present in our country's economy. Crude oil prices will continue to grow in the next few years due to strong demand, limited supply, and the crude oil market witnessing the longest supply shortage in decades. The absence of upstream investment in oil production as demand rises is an indicator of high oil prices that will last at least the next year.
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