Vietnam’s retail sector shows signs of recovery: report

Sales grew for the first time without a low base in the last two months of 2021.

The retail sector in Vietnam has seen signs of real growth in its sales over the last couple months in 2021, hinting at possible recovery for 2022, according to a report from Fitch Solutions.

Retail sales growth in the country have largely underperformed over the last two years and any positive came as a result of low base effects, but the November and December data reported a growth of 1.1% and 1.3% respectively, showing the first signs of the beginning of a recovery in sales, the report stated.

Fitch noted that retail sales grew 8.5% and 9.5% during the same period in 2020, making the last two months of 2020 the first time since the beginning of the pandemic to not have as low a base effect impacting growth, meaning that retail sales are beginning to post real growth.

“Should the government continue to further ease restrictions over 2022, we believe this trend will continue, supporting the wider recovery in household spending,” Fitch said.

Google Mobility data, which tracks the change in visitors to different places relative to a baseline day, also showed that consumers are increasingly returning to physical retail. Fitch noted that mobility for most grocery and pharmacy outlets largely trended around the baseline figure until the strict lockdowns in August to October 2021, but are nonetheless trending positive.

Fitch projected total household spending in Vietnam to grow by a solid 5.7% over 2022, stronger than the 1.8% real growth in household spending over 2021, suggesting that consumer spending will increasingly return to a more normal growth trajectory over the 2022 year.

The report noted that Vietnam was one of the few countries globally to not report a contraction in consumer spending over 2020, largely due to the authority's ability to relatively control the spread of COVID-19 in the country and limiting the extent to which restrictions closed retail trade.

“We believe that as restrictions begin to slowly get lifted over the 2022, spending will return to more conventional growth patterns. However, it will only be in 2023 that real growth, at a forecast 8.3% y-o-y, will reach this trajectory. While this may be the case, we still hold a positive outlook for consumer spending in Vietnam over 2022,” Fitch added.

The vaccination campaign will also be vital in the recovery of consumer spending, Fitch said. As of end-January, the country has fully vaccinated 73.9% against COVID-19, and 49 out of 63 cities and provinces have reported higher than 90% of second-dose coverage in the adult population.

“This bodes well for consumer spending over 2022, as when new deaths and new cases decouple in the next wave of restrictions, the government will gradually ease restrictions over the year,” the report stated.