Introduction to M&A in Vietnam: Latest Trends, Foreign Investment, Regulations, and Promising Industries

Introduction

This report provides a review of Vietnam’s economy in 2022 based on the 10 major economic topics for 2022 and a comprehensive forecast of trends in 2023, along with various forecast figures.

Vietnam Economy 2022 in Review: 10 Major Topics

In 2022, Vietnam’s economy had the following 10 major events.

• General Secretary Nguyen Phu Trong Visits China
• Economic recovery, GDP growth, inflation under control
• Continued trade surplus
• Attracting foreign investors
• Struggling real estate market
• Summary of 18th Resolution
• VN Index surpasses 1,000 points
• Injustice in the New Coronavirus Disaster
• Sluggish bond market
• Full Opening of Borders and SEA Games 31

Beginning next, each topic will be briefly discussed.

General Secretary Nguyen Phu Trong Visits China

General Secretary Nguyen Phu Trong visited China from October 30 to November 1, 2022. This is his first foreign visit after the 13th National Congress of the Communist Party of Vietnam and his first guest in China after the 20th National Congress of the Communist Party of China.

Economic recovery, GDP growth, inflation under control

GDP will increase by 8.02% in 2022, setting a record for the first time in more than a decade; the consumer price index (CPI) in 2022 will be 3.15% (below the 4% assigned by the National Assembly) and inflation will be controlled at 2.59%; GDP per capita in 2022 will reach 95.6 million VND/person or 4,110 USD and is expected to reach 4,110USD, an increase of 393USD over 2021.

Continued trade surplus

Vietnam’s imports and exports in 2022 continued to set new records with a total volume of $732.5 billion handled, up about 10% from 2021. Among them, exports reached $371.85 billion, up 10.6%. The trade balance was a surplus of $11.2 billion, maintaining a trade surplus for the seventh consecutive year.

Attracting foreign investors

In December, 224 new FDI projects were created, bringing the total number of projects in 2022 to 2,036 and the total annual FDI to $27.72 billion.

Struggling real estate market

In 2022, the real estate market faced many difficulties and most projects were halted due to legal restrictions. Bond and stock markets were controlled, credit was tightened, transactions stagnated, loan rates and foreign currency rates all increased, and investors’ earnings and cash flows were greatly reduced.

Summary of the 18th Resolution

General Secretary Nguyen Phu Trong signed and promulgated Resolution No. 18-NQ/TW on the management and use of land, which is of interest to many citizens. This resolution stipulates the mechanisms and methods of determining land prices according to market principles, as well as the functions, duties, and responsibilities of the bodies that determine land prices.

VN Index breaks through 1,000 points

In 2021, the stock market grew by leaps and bounds, reaching all-time highs; in 2022, the market is trending strongly downward due to a number of factors. These factors included the process of raising interest rates globally to curb inflation, which put pressure on domestic rates.

Injustice in the New Coronavirus Disaster

Taking advantage of the social turmoil caused by the new coronavirus pandemic, corrupt criminals took advantage of the opportunity to commit particularly serious fraud. Incidents of bribery and systematic corruption occurred.

Sluggish bond market

Bond issuance declined by more than 60% y/y. The Banking Group remains stable in terms of issuance, while the Real Estate Group remains virtually unchanged.

Full Opening of Borders and SEA Games 31

The SEA Games, also known as the Southeast Asian Games, is a sports festival that is often referred to as “Southeast Asia’s version of the Olympics.

The number of domestic tourists is expected to recover strongly in 022, reaching 101.3 million, 1.5 times the target set at the beginning of the year.

Vietnam Economy 2023 Forecast

Many predictions have been made regarding Vietnam’s economic growth in 2023.

According to the Macroeconomic Report 2023, Dragon Viet Securities stated that Vietnam’s economic growth will definitely decline in 2023. This is due to poor export prospects, which will adversely affect growth in industrial production, investment, and domestic consumption. The downward cycle in real estate will adversely affect growth. The real estate sector accounts for about 3.7% of GDP (2022). The sectors most directly related to real estate include construction (6.6% of GDP) and finance and banking (5.4% of GDP).

Under the base scenario, the VDSC projects GDP growth of 5.6% in 2023, below the government target of 6.5% and the current overall forecast of 6.2% The pessimistic and optimistic scenarios for GDP growth in 2023 are 5.1% to 6.0%.

MBS Securities also stated that between 2020 and 2023, the economy was heavily impacted by the new coronavirus epidemic and growth declined significantly; in 2023, Vietnam is projected to grow steadily, but slow to 6% as the global economy enters a recession when inflation and interest rates are high.

Meanwhile, contrary to the above brokerage firms’ forecasts, the research and analysis department of FIDT Corporation said Vietnam’s economic growth is expected to fluctuate between 5.8 and 7.2%, higher than the approved targets in most regions.

However, according to Huynh Minh Tuan, director of the FIDT, the economic outlook differs between the first six months of the year and the end of the year.

First, until at least 6 years 2023, the Fed and ECB will maintain tight monetary policies to contain inflation. In the future, this will raise interest rates, reduce consumer demand, affect the labor market, and limit economic development in the U.S. and Europe. Vietnam’s exports will be affected by reduced demand in these regions.

VnDirect Securities also believes that the economic growth impulse will slow in 2023. Vietnam is expected to face challenges in 2023 due to low export growth, a high interest rate environment, global inflation remaining at warning levels, tight liquidity, and increasing NPL pressure in the real estate sector.

However, VnDirect Securities forecasts that GDP will increase by 6.7% in 2023, higher than the government’s target of 6.5%.

In the Vietnam Economic Growth Report Q2023-3 and Outlook 1, conducted by the Global Economics & Markets Research department of UOB Bank (Singapore) and released on April 2022, UOB maintains its forecast for Vietnam’s GDP growth in 2023 at 6.6%, consistent with the official forecast of 6.5%. consistent with the official forecast of 6.5%.

The World Bank (WB) forecasts economic growth of 6.7%, an optimistic outlook compared to the somewhat bleak outlook for the rest of the economy.

Chan Thi Hong Minh, director of the Central Institute for Economic Management, said, “The very serious implementation of the Prime Minister’s directive has actually been realized and will be reflected in the statistics as 2022 comes to a close, with GDP growth of 8.02% and inflation of 3.15%.

In particular, there is a clear recovery in areas such as the entry of firms and their return to the market, issues related to the growth of imports and exports, issues related to the promotion of the recovery of the tourism industry, or the opening of better opportunities for foreign investors.” He stated.

The recently released Central Institute for Economic Management report, “Vietnam’s Economy in 2022, Outlook for 2023,” presents 2023 scenarios of Vietnam’s economic growth over two years. Specifically, under the first scenario, GDP growth would reach 6.47%, average inflation would be 4.08%, export growth would be 7.21%, and the trade balance would be US$564 million, while the sixth scenario would increase GDP growth by 8.3%. These growth rates are considerably higher than the global average growth rate projections.

As noted above, some brokerage firms predict that Vietnam’s economy will face more difficulties in 2023, while other institutions predict that Vietnam’s economy will grow dramatically. Thus, there are a variety of predictions regarding Vietnam’s economic growth in 2023.

Summary

A review was made and a comprehensive description of the projected trends for 2023 was given. Various predictions have been made regarding trends in the Vietnamese economy, and it is necessary to continue to gather information and pay attention to the trends.

We hope that Japanese companies considering expansion into Vietnam will contact ONE-VALUE, a Vietnam market entry consulting firm.

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