SINGAPORE – Vietnam is likely to be the top performing Asian economy in 2020 – an achievement without a single quarter of the economic decline at a time when the coronavirus pandemic hit many economies around the world.

Not every Asian economy has reported fourth quarter and full year economic figures. However, estimates by CNBC from official sources – when available – and institutions like the International Monetary Fund have shown that Vietnam has outperformed all of its regional counterparts over the past year.

According to Vietnamese estimates published in late December, the Vietnamese economy grew 2.9% year over year over the past year. That is better than China’s forecast 2.3% growth over the same period.

“With this achievement, Vietnam has seen one of the highest growth rates (rates) in a year when the rest of the world was in deep recessions,” said economists at Bank of America Global Research in a report earlier this month.

Some economists have questioned the accuracy of the data on Vietnam’s Gross Domestic Product (GDP) in recent years. Still, many economists seemed optimistic that the country’s economic growth will accelerate this year.

Here’s a look at how Vietnam became the top performing economy in the region and what is ahead for the country.

Contains Covid

That strong economic run is likely to continue this year, Bank of America economists said.

The bank forecast the Vietnamese economy to grow 9.3% in 2021 – a much higher rate than the World Bank’s forecast of 6.7% expansion.

Resilient exports

Vietnamese manufacturing has been widely blamed for the outperformance of the economy over the past year, with production growing due to steady export demand. That’s a trend that will continue for years to come, economists said.

“Given that Vietnam has been a major beneficiary of the trend to shift / diversify the supply chain out of China in recent years, we see great scope for growth in Vietnamese exports in the years to come,” Fitch Solutions said in a December report .

The Southeast Asian country has also signed several new trade deals – with the UK and the European Union, for example – that could further boost trade flows, the consulting firm added.

A potential threat to the growth of Vietnamese exports – and thus the macroeconomic outlook – is US sanctions, Gareth Leather, senior Asia economist at Capital Economics, said in a report this month.

The government of former President Donald Trump described Vietnam as a currency manipulator in December. This would allow the US to take punitive measures like import duties from Vietnam.

However, analysts at the Australian bank ANZ said they do not expect immediate US action, partly because President Joe Biden’s administration “may not be as tough on this matter as it was under President Trump”.

Recovery in services

The Vietnamese service sector, severely affected by the pandemic, picked up towards the end of 2020.

Economists said the extent of the recovery in services – especially in tourism – will determine how quickly the Vietnamese economy will return to its pre-pandemic path.

Leder described the prospects for tourism as “poor”. Still, his forecast of 10% growth for Vietnam this year is one of the most optimistic on the market.

“We expect GDP to be only 1.5% lower by the end of 2021 than without the crisis. This is one of the smallest gaps in the region,” he wrote.

“The poor outlook for the tourism sector will continue to hold back a full recovery and is the main reason we believe a small output gap will remain.”