Vietnam’s economy slowed sharply in the first quarter of this year, with growth coming in much weaker than expected at 3.3% as exporters were hit by rising costs and weaker demand, the General Statistics Office reported on Wednesday.
The January-March quarter’s slowdown of 5.9% year-on-year growth in the final quarter of 2022 was nearly as severe as at the start of the pandemic and the second-lowest for the first quarter in 12 years, it said.
Vietnam has been one of the most dynamic economies in Asia in recent years, buoyed by heavy foreign investment in electronics manufacturing and other light industries. But efforts to slow economies to combat stubbornly high inflation are dampening demand for consumer goods and other products.
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The drop is “a sharp drop that underscores the seriousness of the problem” and is why the central bank cut its benchmark interest rate in early March to ease a credit crunch, researchers at Mizuho Bank said in a report.
Data released on Wednesday showed overall trade, including imports and exports, fell 13%.
Hanoi, Vietnam is pictured on March 29, 2023. At 3.3%, economic growth in Vietnam was significantly weaker than expected in the first quarter of this year. Exporters in the country suffered from rising costs and weaker demand. (AP Photo/Hau Dinh)
The vital manufacturing and construction sectors grew just 0.4% yoy amid a severe downturn in the real estate sector.
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“The main risk to Vietnam’s growth is the deepening crisis in the real estate sector, triggering a string of defaults,” Oxford Economics’ Theng Theng Tan said in a report. “An ongoing crackdown on corruption has also deterred investors and disrupted investment approvals.”
However, strength in the service sector is likely to offset weakness in those industries, the Mizuho report said.
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In 2022, Vietnam’s economy grew by 8% as the country recovered from travel restrictions and trade disruptions due to the pandemic. Inflation remained relatively moderate at 2.6% excluding volatile food and energy costs.
Growth forecasts for this year have been cut sharply to about half of last year’s robust pace. However, tourism is a bright spot in the economy after the country opened its borders further late last year.
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