In 2020, successful containment measures coupled with supportive policies made Viet Nam the regional top-performing economy. A severe outbreak in April 2021 led to a historical contraction in economic activity in the third quarter of the year.

However, a remarkable vaccination rollout facilitated the shift from a zero-tolerance strategy towards living with the virus. Policy support helped cushion the impact of COVID-19, while the Government successfully maintained fiscal, external, and financial stability.

Real GDP grew by 2.6 percent in 2021, slower than in 2020, owing to more protracted lockdowns and local supply disruptions. Viet Nam's external position in 2021 was assessed to be stronger than warranted by fundamentals.

A recovery is underway and high frequency indicators point to stronger momentum going into 2022, with rising retail sales, industrial production, and firm entry. Growth is expected to reach 6 percent in 2022 as activity normalization continues and the PRD is implemented.

While inflation has recently picked up, due to rising commodity prices and supply-chain disruptions, it remains well below the central bank's inflation ceiling, given economic slack and relatively stable food and administered prices.

The IMF remarked that Viet Nam's external position is stronger than warranted by fundamentals and desirable policies. In this regard, and called for continued efforts to boost domestic private investment and enhance social safety nets.

The IMF also welcomed Viet Nam's recent steps towards greater exchange rate flexibility and monetary policy modernization and encouraged continued efforts in this direction./.