HANOI -- Vietnam's National Statistical Office said on Monday that real gross domestic product rose 4.48% from a year earlier in January-March.
First-quarter growth remained the same as the fourth quarter last year, which stood at 4.48%. However, this year's first quarter was up from the 3.68% recorded in the first quarter of 2020.
Exports are the country's key economic growth driver. Vietnam's largest export market for smartphones and personal computers is the U.S., which comprises about 30% of the country's exports at $21.2 billion and which grew 32.8% on year. Overall exports for the January-March quarter rose to $77.34 billion, up 22% from a year earlier.
Smartphones and parts were up 9.3%, totaling $14.1 billion worth of exports. The sector accounts for 18.2% of the country's total exports. Samsung Electronics is the key contributor, as it operates two huge smartphone factories in the north and produces half of its global production in Vietnam. Samsung is also building a large research facility in central Hanoi to focus its investment in Vietnam.
Electrical products, computers and parts exports rose 31.3% on year to $12 billion as the pandemic continued and telecommuting increased. Sewing products, a major export, have also recovered. Personal consumption is also on a par with the previous year.
Companies based in China have been moving production to Vietnam to avoid the effects of ongoing trade tensions with China under the new Biden administration. Vietnam as a whole has held back the spread of COVID-19 since the beginning of 2021, and production has been strong.
On the other hand, there is no sign of recovery in tourism due to Vietnam's strict quarantine measures. Foreign tourists remained banned from entering the country in March.
First-quarter growth, however, fell below the 5.12% expected by the government.
The impact of a COVID-19 cluster in the northern part of the country, including the capital city of Hanoi, weighed on GDP.
The Asian Development Bank projects a 6.1% economic growth rate for Vietnam for the full year of 2021. The figure was 2.91% for the whole of 2020, and continued to grow in spite of the coronavirus.
While the economy is booming, relations with the U.S. are a cause for concern. Vietnam was designated as a currency manipulator by the U.S. Treasury Department in December 2020. As a result of the U.S.-China trade war and other factors, the U.S. trade deficit in goods with Vietnam ballooned to about $70 billion in 2020.
Vietnam is America's third-largest trading partner, after China and Mexico.
The Biden administration is also pressing Vietnam to correct the trade imbalance, although U.S. long-term interest rates are rising and Vietnam's currency, the dong, is weakening. Although Vietnam has so far avoided imposing sanctions on North Korea, pressure from the U.S. is expected to continue. Yuta Tsukada at the Japan Research Institute, said, "A strong 1% will push exports down 1.2%."
The Biden government's "current policies, such as increasing basic salary, and big economic stimulus packages in the U.S. are expected to help exports from Vietnam," Anh Pham, an independent business growth and strategy adviser, told Nikkei Asia. "But this will also increase imports from China, as Vietnam relies on raw materials from the neighboring country," he said. "In the short term, the U.S. is unlikely to focus much on the currency issues compared to Trump's administration."
"Vietnam and the U.S. need to negotiate to find solutions to reduce the trade imbalance in the coming time," Le Dang Doanh, a Hanoi based economic expert told Nikkei Asia. He also said trade between Vietnam and China will continue to grow. "Vietnam is having a huge trade deficit with China, and it is necessary to have solutions to reduce the imbalance," he added.
Additional reporting by Kim Dung in Ho Chi Minh City.