VIETNAM'S effective containment of Covid-19 should allow it to make a quicker rebound than most other economies in the region, Oxford Economics lead Asia economist Sian Fenner wrote in a July 14 report.
With an expected recovery in the second half of the year, Oxford Economics' forecast is for gross domestic product growth of 2.3 per cent in 2020 -- slowing from 7 per cent in 2019 -- followed by 8 per cent growth in 2021.
But the country remains vulnerable to external developments, particularly those affecting trade, tourism, and foreign direct investment (FDI), she added.
Workplace mobility has risen from its April low, industrial production rose 7.5 per cent year on year in June, and goods exports in US$ terms rose 5.3 per cent year on year in June, after double-digit declines in the preceding two months.
"Whilst encouraging, we remain cautious in our outlook for momentum, following the initial bounce-back post lockdowns. Indeed, part of the recent rebound in retail sales reflects the release of pent-up demand," said the report.
FDI is expected to pick up in the second half, with Vietnam's labour dynamics and geographical proximity to China ensuring that it remains an attractive destination for investment, particularly in manufacturing.
However, ongoing restrictions on international travel will continue to restrict tourism, with government efforts to promote domestic travel still unlikely to offset the fall in international travel.
And with exports accounting for over 80 per cent of Vietnam's GDP, the pace of recovery will rely on global trade momentum.
One key downside risk is a second wave of Covid-19 and renewed global lockdowns. Under this scenario, Vietnam may only achieve 1.5 per cent growth this year, weakening to -0.2 per cent in 2021.