Inflationary pressure slowing retail sales in Vietnam: report

Retail sales growth fell from 36.1% in September to 17.1% in October.

Growing inflationary pressures have been eroding consumption in Vietnam, causing the country’s retail sector to see a slowdown in sales recovery compared to the strong trajectory seen in the first half of 2022, according to a report from Fitch Solutions.

Retail sales in October indicated that retail sales in Vietnam grew 17.1% YoY, a sharp fall from the 36.1% growth the month prior, the report noted.

“While retail sales growth in October 2022 is the tenth straight month of recorded growth since November 2021, it also clocked the slowest growth pace since April 2022 as growing inflationary pressures erode consumption in Vietnam,” Fitch said.

Consumer spending in Vietnam is expected to post solid growth over 2023, with real household spending growing by 7.3% YoY. This is a slight dip from the 7.5% growth estimated for 2022, although Fitch noted that growth in 2022 came largely from a low base in 2021 at 2.6%.

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The growth in consumer spending growth over 2023 is expected to come as the wider Vietnamese economy recovers and growth figures return to a more stable and medium-term trajectory, Fitch said.

“This is supported both by growing domestic demand, as well as the expected recovery of international tourism. Although Inflationary forces will rise across 2023, strong showings in real income growth for Vietnamese consumers will give greater propensity for household spending growth,” the report stated.

Internationally, inflationary pressures continue to build, Fitch said, noting how over the latter half of 2022, inflation is beginning to shift into services, such as tourism, and this is still expected to continue into 2023.

In Vietnam, inflation has been ticking upwards, reaching 4.3% YoY in October, the highest rate of inflation in the country since March 2020, blamed on the sharp rises in prices including housing and food.