Vietnam fastest growing Asean economy, says British bank

HANOI – Driven by strong FDI-supported electronics manufacturing and rising consumption, Vietnam’s GDP growth is likely to reach 7 per cent in 2018, according to Standard Chartered Bank.

Manufacturing and agriculture are likely to remain the primary growth drivers in the second half of the year.

The forecast is highlighted in the bank’s recently published Global Research report on Vietnam entitled “Vietnam – Fast, not furious, growth”.

Chidu Narayanan, Economist, Asia, Standard Chartered Bank, said: “Vietnam expanded 7.1 per cent in first half of the year, moderating mildly in the second quarter after a record 7.4 per cent growth year-on-year in the first quarter, in line with our forecast. This is the first year since the global financial crisis that the second quarter growth has been slower than the first one; we believe this is a sign of a focus on sustainable growth over the medium term. We expect the second half of the year growth to remain robust, albeit mildly slower than in the first six months of the year.

“Vietnam is likely to remain the fastest-growing ASEAN economy in 2018 and 2019, as in 2017. We remain positive on Vietnam’s medium term growth on strong manufacturing activity, as FDI inflows to electronics manufacturing remain strong.”

According to the latest macro-economic research report, manufacturing is projected to record another year of double-digit growth and agriculture growth will continue its recovery in the second half of the year, even as construction slows down on more modest growth in the real-estate sector. At the same time, electronics export growth is likely to stay robust, albeit lower than in 2017, leading to a trade surplus and supporting overall growth. The Bank maintains its views that FDI inflows will stay strong in 2018 and 2019-20, with registered capital of close to US$17 billion each year, and FDI inflows to the manufacturing sector, particularly electronics manufacturing, will remain high in the medium term.

The study also expects steady growth in services to support overall growth in 2018, led by strong domestic trading activity. The services sector, which makes up close to 40 per cent of the economy, is likely to remain robust in the second half of the year after rising by a steady 7 per cent year-on-year in the first six months of the year. The rise of the business process outsourcing (BPO) sector, aided by a young, well-educated, low-cost labour force, should support services sector growth in the medium term.

On the foreign exchange outlook, Standard Chartered economists raise their USD-VND forecasts to 23,400 by end-2018 and expect a small dong depreciation in early 2019, before ending 2019 mildly stronger against the US dollar as positive domestic and external factors support the currency.