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Vietnam’s economy slowed sharply in the first quarter of this year, with growth coming in at a much weaker than expected 3.3%, as its exporters were hit by rising costs and weaker demand, the General Statistics Office reported Wednesday.
The slowdown in the January-March quarter from 5.9% year-on-year growth in the last quarter of 2022 was nearly as severe as that during the beginning 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 strong foreign investment in manufacturing of electronics and other light industries. But efforts to slow economies to fight stubbornly high inflation are denting demand for consumer goods and other products.
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The decline is “a stark one which underscores the severity of the issue,” and is why the central bank cut its key lending rate earlier in March to help ease a credit crunch, Mizuho Bank researchers said in a report.
The data released Wednesday showed that total trade, including both imports and exports, fell 13%.
Hanoi, Vietnam, is pictured on March 29, 2023. Economic growth in Vietnam came in much weaker than expected at 3.3% in the first quarter of this year. Exporters in the country were hit by rising costs and weaker demand. (AP Photo/Hau Dinh)
The vital manufacturing and construction sectors grew just 0.4% from a year earlier amid a severe downturn in the property sector.
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“The primary risk facing Vietnam’s growth is the worsening real estate sector crunch that is triggering an episode of defaults,” Theng Theng Tan of Oxford Economics said in a report. “An ongoing crackdown on corruption has also deterred investors and caused disruptions in investment approvals.”
However, strength in the services sector likely will offset weakness in those industries, the Mizuho report said.
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In 2022, the Vietnamese economy grew at an 8% pace as the country recovered from restrictions on travel and disruptions to trade from the pandemic. Inflation remained relatively moderate, at 2.6% excluding volatile food and energy costs.
Estimates for growth this year have been lowered sharply, to roughly half last year’s robust pace. Tourism is one brighter spot in the economy, though, after the country opened its borders wider late last year.