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Samson:  Việt Nam firmly rebounds amid challenges

19th July, 2022

HSBC Global Research expects Việt Nam to be among the region's top growing nations, as it was one of the world's few countries to record growth in two consecutive years since the pandemic.

Việt Nam's economy has started 2022 on a firm footing. Sticking with a policy to "co-live with the virus," the country has accelerated its vaccination drive and gradually removed local restrictions, fuelling consumer sentiment, leading to an ongoing rebound in local consumption, according to analysts of Markets and Securities Services, HSBC Vietnam.

Ngô Đăng Khoa, Country Head of Markets and Securities Services, HSBC Vietnam, said the country's total goods retail sales and consumer service revenues grew 11.7 per cent year-on-year in Q1 this year, or 7.9 per cent if inflation was excluded (1.9 per cent in 2021).

The re-opening from mid-March this year has been especially crucial for Việt Nam's services recovery. In the first half of this year, around 602,000 foreign tourists flocked to Việt Nam, a clear sign of recovery of around 6.8 times 2021's level. However, HSBC's analysts expect to see a slow rebound in tourism this year due to COVID-19, which has a psychological impact on foreigners who fear going abroad and a dwindling desire among consumers around the globe to open their wallets because of soaring inflation.

Another driving force behind this slow recovery is the tension in Russia and China's "zero COVID" policy, which holds Việt Nam's tourism back from a quick bounce back, given these two are its two main sources of visitors. Meanwhile, manufacturing continues to roar, growing at 8.48 per cent year-on-year, and mobile phone component production expanded by 22.2 per cent.

In addition, the PMI rose from 51.7 in April to 54.7 in May, recording a 12-month-high before decreasing slightly to 54 in June. Thanks to multi-year consistent FDI inflows in tech manufacturing, the country has successfully transformed into a rising global base. While the pandemic partially disrupted the process, interest remain high. For example, Samsung recently started building a US$220 million R&D centre in Hà Nội, its largest in Southeast Asia, and is set to expand its plants in Bắc Ninh and Thái Nguyên.

According to analysts, Apple has had 11 factories of its Taiwanese manufacturers in its supply chain moved to Việt Nam. Most importantly, Việt Nam's key growth engine is set to recover strongly as the labour shortage continues to ease. After the Tết holidays, over 90 per cent of workers have returned to HCM City.

The country's export grew 17.3 per cent year-on-year in the first six months of 2022. Its second quarter's GDP rose to 7.72 per cent year on year thanks to broad-based growth, leading to a 6.42 per cent year-on-year growth in the first half of this year. All of these point to a steady recovery in the country. Thus, HSBC now expects the economy to grow 6.9 per cent (up from our previous forecast of 6.2 per cent and 6.6 per cent) in 2022, likely topping the region.

Despite the optimism, headwinds prevail. In particular, Việt Nam is facing multiple challenges given elevated global energy prices. This will increase its energy bills, deteriorating its terms of trade. Higher oil prices will raise residents' cost of living, dampening the pace of recovery for private consumption, especially when the labour market has shown signs of recovery.

Global energy inflation continues to pace, pushing domestic petrol prices to new highs. Given elevated global oil prices, they expected the trend to persist, putting upward pressure on inflation. Despite high energy costs, moderate food inflation – given relatively stable local production – has helped curtail headline inflation.

Wary of risks

A surge in global energy prices remains the biggest risk to the country's growth. The most evident impact is Việt Nam's increasing energy bills.

Despite strong exports, the trade balance has narrowed to a marginal surplus of only US$0.6 billion in the first five months of 2022. This will erode the country's current account advantage, putting downward pressure on the Vietnamese đồng. Analysts expect Việt Nam to run a current account deficit for the second consecutive year, although the magnitude should be smaller than that of 2021.

In addition, stiffening trade headwinds need to be watched closely. A rotation of global demand from goods to services and lingering supply chain disruptions in mainland China will determine how long Việt Nam's strong export growth can be sustained.

For one, global consumption is shifting from goods to services. In addition, mainland China's supply chain disruptions make it increasingly difficult for Vietnamese manufacturers to source the materials and inputs used for future exports. This will answer how long Vietnam's exports can be sustained at such a strong pace.

Even though the Government has issued support packages to help those most affected by the COVID-19 pandemic to ensure social security, rising inflation poses an additional challenge to an inclusive recovery. Low-income households are disproportionately affected, worsening inequality in the near term.

Việt Nam to shine in second half of 2022

Việt Nam has become the regional top-performing economy thanks to its resilient huge economic potential and quick return post-Covid. HSBC Global Research expects Việt Nam to be among the region's top growing nations. However, China's supply chain disruptions will make its import-intensive manufacturing base increasingly challenging. In the first half of 2022, 94 per cent of its imports came from materials, with China remaining Việt Nam's largest import market.

Approximately 30 per cent of Việt Nam's imports came from China, mainly electronics (30 per cent) and machines (22 per cent). Therefore, China's supply chain bottlenecks will likely stiffen the headwinds against Việt Nam's export growth. FDI continues to drive Việt Nam's economic success story. The country is among the top two ASEAN FDI receivers relative to GDP, highlighting its increasing attractiveness. In recent years, the country has become a rising star in global supply chains, gaining substantial global market share in sectors, including textiles, footwear and consumer electronics.

The country has climbed up the value chain over the years, becoming a key electronics product manufacturing hub, attracting stable FDI inflows with its sound macro fundamentals, preferential tax incentives and an abundance of relatively cheap and productive labour.

FDI attraction is equally important as sustainability for the country. Now that Việt Nam has made its ambitious commitment at COP26, sustainability has gained more attention. For example, Việt Nam Association Of Supporting Industries (VASI) has suggested refining the quality of FDI, which means non-renewable energy-consuming or environment-unfriendly technologies are not allowed to enter Việt Nam. "Green FDI" will be a key trend that Việt Nam should look out for in the future.

To attract "green FDI", Việt Nam has been driving the economy towards green growth, sustainability and lower greenhouse gas emissions through National Green Growth Strategy 2021-2030. The Government has worked out the National Action Plan for 2021-2030 to carry out this Strategy, with specific missions and targets for each sector.  LINK

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Samson:  Vietnam - Cashless payment expands rapidly with e-commerce boom

22nd July, 2022

Cashless payments are expanding rapidly in Hà Nôi, driven by the booming e-commerce industry, but experts say more can be done to increase digital spending.

Speaking at an event to promote paying by means other than actual cash, Lại Việt Anh, Deputy Director of the Việt Nam E-commerce and Digital Economy Agency under the Ministry of Industry and Trade said e-commerce was becoming an important pillar in the development of the digital economy.

The event, co-organised by the municipal Department of Industry and Trade and the Việt Nam E-commerce and Digital Economy, aimed to promote the development of e-commerce and encourage citizens, enterprises, and organisations to go cashless, Anh said.

Hà Nội has set the target that by the end of this year, cashless payments would make up for 45 per cent of e-commerce and 65 per cent of transactions on e-commerce websites, apps with e-invoices. In addition, small and medium-sized enterprises, operating on e-commerce platforms, including social networks with e-commerce trading functions, would account for 45 per cent and 35 per cent would participate in e-commerce via mobile apps.

The city also wants 98 per cent of enterprises to declare and pay taxes electronically by the end of 2022. Cashless payment for water and electricity bills would account for 98 per cent and 99.7 per cent, respectively.

According to Trần Thị Phương Lan, acting Director of the municipal Department of Industry and Trade, the department would continue to enhance the cooperation with the State Bank of Vietnam’s Hà Nội branch to encourage the provision of modern payment services to promote e-commerce and digital transformation. Solutions would also be raised to encourage consumers to switch to online shopping.

Statistics of the central bank’s Hà Nội branch showed that to date, more than 39 million e-wallets have been activated, representing a rise of 3.68 per cent compared to the end of 2021. The total value of transactions via e-wallets reached more than VNĐ271 trillion. Nearly 70 per cent of Vietnamese adults had payment accounts at credit institutions with a total of 5.5 million accounts and 1.77 million mobile money accounts, 67.2 per cent of which were opened in rural and remote areas.

Hoàng Huyền Trân, Deputy Director of the central bank’s Hà Nội branch said that cashless payments would be strengthened in public services to create convenience for residents paying electricity and water bills, as well as school and hospital fees. The event was held as a part of the Hà Nội annual promotion programme and is expected to create impetus for enterprises to increase cashless payment, and e-commerce operations and promote consumption.  LINK

Samson:  Việt Nam FinTech market expected to reach $18 billion by 2024

21st July, 2022

The FinTech market in Việt Nam is expected to grow to US$18 billion by 2024, according to analysts at financial holding Robocash Group.

Việt Nam is one of the leaders among ASEAN in terms of the volume of financing for FinTech, second only to Singapore.

Ninety-three per cent of all venture investments in the country is directed at e-wallets and the e-money segment.

The total number of FinTech companies has grown to 97 since 2016, an 84.5 per cent increase. However, the number of newly launched start-ups each year decreased from 11 to 2. The market features high competitiveness and a high entry bar. 

Transaction volume has seen a 152.8 per cent growth since 2016, with 29.5 million new FinTech users. As a result, every second Vietnamese uses at least one FinTech service. The Vietnamese population's demand for digital services (transactions, payments and wallets) is remarkable. 

According to company analysts, Việt Nam FinTech is young and promising. The market valuation has increased from $0.7 billion to $4.5 billion since 2016.

In the near future, the government will become more involved in FinTech, evidenced by the growing favourable legislation for financial technologies. The FinTech regulatory sandbox and the legal framework for digital assets and cryptocurrencies will also further develop in the industry.   LINK

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Samson:  World Bank looks to boost partnership with Việt Nam

19th July, 2022

President Nguyễn Xuân Phúc received World Bank (WB) Managing Director of Operations Axel Van Trotsenburg on Tuesday for discussions on the partnership between the country and the financial institution. 

President Phúc expressed gratitude toward the bank for its work in poverty reduction, socio-economic development, and other national programmes in Việt Nam.  He regarded the Việt Nam 2035 Report, which was conducted with the support of WB, as a high-quality study with a long-term vision for the country. 

Việt Nam hoped that WB would continue this assistance with the 2045 report, especially in the global situation where there are major changes that affect Việt Nam’s development goals by 2030, with the vision to 2045, he added.  The WB’s support was expected in the three breakthrough areas of the country’s socio-economic development strategy: institutions, human resources and infrastructure.  President Phúc paid high regard to the WB Director’s visit to various localities in Việt Nam, for a better understanding of climate change's impact on people. 

Việt Nam is one of the countries most affected by climate change, he said, and the bank’s support would help address the challenges that threaten the livelihoods of millions in the country.  Renewable energy is also an area for investment and technical support, in order to develop a carbon-free economy, as this is one of Việt Nam’s areas of strength, according to the President. 

In regard to post-pandemic recovery, President Phúc said that Việt Nam was committed to cooperating with the WB in collaborative programmes in the future, especially in the disbursement of the Official Development Assistance (ODA) fund.  WB Managing Director of Operations Axel Van Trotsenburg said that Việt Nam’s success had been evident in its achievements and potential for economic development. The nation was making significant progress and was rapidly becoming a middle-income country.

Trotsenburg said that WB hoped to continue its role in supporting Việt Nam in its development and would be pleased to see the sustainable and successful cooperation between the institution and the country.  The WB would also be willing to work with Việt Nam on the 2045 report and would make all efforts to secure the necessary resources to carry out this study.  The bank also paid special attention to the breakthroughs of development that President Phúc mentioned and would be interested in working with Việt Nam in these areas. 

The WB director also added that, following COP26, the financial institution had been working with countries around the world to tackle the challenges of climate change in association with the development goals. The bank was conducting reports on climate change impact in 25 countries, including Việt Nam. 

The Việt Nam report was now completed, with multiple solutions proposed for the country to study and apply, as well as to come up with short and long-term measures in addressing climate change issues. The WB would gladly cooperate with Việt Nam to realise the initiatives and solutions in this report, especially in the Mekong Delta.   LINK

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Samson:  Vietnam's PM praises World Bank for support

19th July, 2022

Prime Minister Phạm Minh Chính hosted a reception in Hà Nội on Monday afternoon for World Bank (WB) Managing Director of Operations Axel van Trotsenburg, during which he affirmed that Việt Nam considered the bank a good friend and important development partner.

He thanked the bank for supporting resources, providing macro-policy advice, making positive contributions to Việt Nam's socio-economic development and realising the Millennium Development Goals and e-Government building.

The Government leader also thanked the WB for supporting the country in postponing the quick repayment of International Development Association (IDA) loans for one more year from July 2020 to July 2021 (worth nearly US$400 million) to help the Government have more resources, and accompanying the country in difficult times during COVID-19 prevention, recovery and socio-economic development. He mentioned the recent planning and investment promotion conference in the Mekong Delta, during which six development banks pledged to finance about US$2.2 billion for the region, with $450 million expected to come from the WB.

Việt Nam has committed to contributing nearly $16 million during 2021-2023 in the bank’s most significant capital increase in history as it is mobilising $13 billion to supplement its operation capital, thus demonstrating the country’s great responsibility, obligation and effort amid many difficulties and challenges. He said he appreciated the WB’s assistance for Việt Nam in completing the building of the Vietnam Report 2035. He asked the bank to continue supporting the country in developing strategic infrastructure, promoting sustainable development and green growth, reducing gas emissions and responding to climate change.

Regarding Việt Nam’s commitments at the 26th United Nations Climate Change Conference, Chính affirmed that Việt Nam was joining hands with the international community in climate change response with an approach to ensure fairness and justice, identifying it as one of the urgent and important tasks. It would be also an opportunity to transform the development model and build an energy transition industry, he said. He asked the WB to continue supporting Việt Nam in climate change adaptation. Axel said he appreciated the Vietnamese Government's solutions to simultaneously realise its goals in the past and present, as well as overcome challenges.

Over the past years, Việt Nam had also achieved a high growth rate and been an image showing the general development of the entire Asia-Pacific region. The World Bank had learned many lessons from Việt Nam's practice. Việt Nam could share its development and pandemic prevention experience with many other countries while contributing to solving many global issues such as food security, he said. He emphasised that he would continue to accompany the Vietnamese Government in the upcoming development journey not only in the financial sector but also in solving strategic issues such as improving the health system's capacity, responding to diseases and adapting to climate change.

The World Bank would be ready to send a team of global experts to support the Vietnamese Government in developing the Report 2045, thus contributing to the goal of building the nation into a developed and high-income country by 2045, he added.   LINK