(Photo by the Ministry of Industry and Trade)

Despite rising daily COVID-19 infections, Vietnam has refrained from re-imposing harsh restrictions, said HSBC. 

Policymakers have been sticking with their policy to “co-live with the virus”, partly thanks to the accelerated vaccination drive. On the domestic front, this is fuelling consumer sentiment, leading to an ongoing rebound in local consumption. Indeed, after an almost 4% year on year fall in 2021, retail sales grew 1.3% year on year in January 2022, according to HSBC.

Most importantly, Vietnam’s key growth engine is set to see a strong recovery, as the labour shortage continues to ease. January’s export growth reached 1.6%.

In addition, the Purchasing Managers' Index (PMI) rose to a 9-month-high, indicating a strong rebound in industrial output. Most of the key sub-indicators continue to show a sustained recovery, offering optimism that manufacturing will likely return to its pre-COVID-19 levels.

While rising inflation in parts of ASEAN has gained attention, Vietnam’s inflation is unlikely to be a big concern this year, said HSBC. It raised Vietnam’s 2022 average inflation forecast slightly to 3%, from 2.7% previously, but said this should not pose a major risk to the State Bank of Vietnam (SBV), as it will likely remain well below the 4% inflation target.