Vietnam’s economy is slowing due to rising costs and weaker exports

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Vietnam’s economy slowed sharply in the first quarter of this year, with growth coming in much weaker than expected at 3.3% as its 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.

The vital manufacturing and construction sectors grew just 0.4% yoy amid a severe downturn in the real estate sector.

“The main risk to Vietnam’s growth is the deepening crisis in the real estate sector, triggering a series of defaults,” Oxford Economics’ Theng Theng Tan said in a report. “An ongoing crackdown on corruption has also deterred investors and disrupted investment approvals.”

According to the report, overall trade, including imports and exports, fell 13%.

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.