Vietnam posts record GDP slump in Q3 due to COVID-19 curbs

FILE PHOTO: Shipping containers are seen at a port in Hai Phong city, Vietnam July 12, 2018. REUTERS/Kham/File Photo

HANOI (Reuters) - Vietnam's gross domestic product contracted 6.17% in the third quarter of 2021 from a year earlier as pandemic restrictions hit, the sharpest quarterly decline on record, government data released on Wednesday showed.

The services sector contracted 9.28% from a year earlier in the period, while the industrial and construction sector fell 5.02%, the General Statistics Office (GSO) said in a statement. The agriculture sector expanded 1.04%.

"The COVID-19 pandemic has seriously affected all aspects of the economy with many key production cities and provinces having to impose strict lockdowns," the GSO said in a statement.

The GSO traditionally releases data before the end of the reporting period and its data is often subject to revision. Growth in the second quarter was revised down to 6.57% from 6.61%.

After successfully containing the virus for most of last year, Vietnam has been grappling with a rise in infections since April, with total cases at 770,000 and 18,936 deaths, mostly in its business hub Ho Chi Minh City and neighbouring industrial provinces.

The outbreak has forced authorities to impose strict lockdowns in Vietnam's largest cities and provinces, and prompted companies to suspend production.

The government has in the past week taken steps to gradually ease lockdowns, following pressure from business associations and warnings by investors that the restrictions will prompt a shift away from the country.

The government is targeting a 6.5% GDP increase this year, but a minister earlier this month said growth could be 3.5%-4.0%.

Analysts said monthly activity data indicated the worst may be over.

"We still expect a sizeable pick-up in the fourth quarter with production quickly normalising due to higher vaccination rates among manufacturing employees and a broader easing in restrictions," Oxford Economics said in a note.

However, it said logistical and supply chain disruptions were a risk to the outlook and that it would be revising down its 2021 GDP growth forecast of 5.4%.

Around 90,000 businesses suspended operations or went bankrupt in the January-September period, the GSO said. Among them, 32,400 were dissolved, up 17.4% from a year earlier.

It said the unemployment rate rose to 3.43% in the third quarter from 2.40% in the second quarter.

According to the GSO, exports in September likely fell 0.6% from a year earlier to $27 billion and the industrial production index dropped 5.5%.

(Editing by Ed Davies)