HO CHI MINH CITY: Vietnam’s economic growth accelerated in the second quarter, despite the country’s worst Covid outbreak yet, as global demand regained momentum.

       Gross domestic product (GDP) rose 6.61% in the second quarter compared to a year earlier, up from a revised 4.65% in the first quarter, the General Statistics Office said.

       That compared to the median estimate of 7.2% in a Bloomberg survey of six economists.

       Growth picked up on increases in industrial output as demand recovered in global markets, and as favourable weather boosted agricultural products, Nguyen Thi Huong, head of the General Statistics Office, said in a briefing in Hanoi.

       Increased government spending also helped drive the expansion, she said.

       The country’s benchmark stock index was up 0.3% as of 9:42am local time yesterday.

       The economy expanded 5.64% for the first six months of the year, below the government forecast of 5.8% growth for the first half, which was already revised down from January’s 6.22% outlook.

       The government expects GDP to grow 6%-6.5% for the full year.

       Vietnam was successful at limiting infections during the early months of the pandemic, but an outbreak that began in late-April forced the temporary closure of industrial parks housing key electronics manufacturing hubs.

       Tenants included units of Foxconn Technology Group and suppliers of Samsung Electronics Co and Apple Inc.

       “Looking past the jump in year-on-year growth due to a weak base for comparison, GDP data suggest that Vietnam is facing a heavy economic toll from its efforts to control the virus, ” Gareth Leather, senior Asia economist at Capital Economics Ltd, wrote in a research note.

       “With sporadic outbreaks continuing, the economy is likely to suffer further in the months ahead.”

       The State Bank of Vietnam said last week it will hold policy rates stable in the second half of the year and pursue flexible monetary and currency policies, as it remains vigilant about rising inflation.

       The monetary regulator is seeking to shore up the economy amid Vietnam’s worst coronavirus outbreak and slow vaccine rollout.

       Consumer prices rose 2.41% in June from a year earlier. The government aims to cap average inflation at 4% this year.

       “Rising inflation reduces the likelihood of further interest rate cuts, in our view. We also do not expect rate hikes, despite improving economic and credit growth, ” Standard Chartered Plc economist Tim Leelahaphan said in a research note.

       “However, the possibility of a rate hike may gradually emerge if inflation and growth accelerate faster than expected.”

       Exports rose 17.3% in June compared to a year earlier, while imports climbed 33.5%. For the first half of the year, exports were up 28.4% and imports rose 36.1%. — Bloomberg