Vietnam’s retail sector shows signs of recovery: report

Retail sales in the country rose 20% in January.

Vietnam’s retail sector has started to show signs of recovery from the slowdown in the sales recovery trajectory seen in the second half of 2022, according to a report from Fitch Solutions.

Retail sales in January indicated that retail sales in Vietnam grew 20% YoY, an uptick from the 17.1% YoY growth the month prior. This was the strongest showing in retail trade since September 2022 as consumption remains strong as pandemic effects wane, 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 expected to be a slowdown from growth in 2022, which grew by 7.5% YoY, but growth in 2022 came off a low base in 2021 due to the recovery effects.

“The growth in consumer spending growth over 2023 will come as the wider Vietnamese economy recovers and growth figures return to a more stable and medium-term trajectory. This is supported by growing domestic demand, as well as the expected recovery of international tourism,” the report stated.

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But real household spending growth is expected to be inhibited in 2023 due to the effects of elevated inflation, which would also negatively impact consumer spending over the next five years and will significantly feed into purchasing habits, Fitch said.

In many markets, inflationary pressures remain elevated and whilst the rate of price changes are slowing, they still remain higher than central banks’ targets, as well as what consumers have grown accustomed to, especially over the past decade, the report noted.

In Vietnam, inflation has been ticking upwards, reaching 4.9% YoY in January, the highest in the country since March 2020 due to the sharp rises in prices across most categories, Fitch said.

“As Vietnamese consumers are focusing on essentials as budgets tighten, we expect the rising cost for daily essentials to be felt further by consumers. Our Country Risk team forecasts inflation to mediate downwards for 2023, averaging 4.5% y-o-y and ending the year at 4%,” the report added.

In addition, the unemployment rate in the country was 2.32% in Q4 last year, a slight uptick from 2.28% in Q3 2022. Fitch expects unemployment to average 2.2% in 2023, as the labour market loosens slightly.