Bank positive on growth medium term on strong manufacturing activity and electronics FDI, according to latest research publication.
Standard Chartered Bank forecasts robust GDP growth for Vietnam of 7 per cent in 2018 and 6.9 per cent next year, driven by strong FDI-supported electronics manufacturing and rising consumption with manufacturing and agriculture likely to remain the primary growth drivers in the second half of the year.
The forecast is highlighted in the bank’s recently-released Global Research report on Vietnam entitled “Vietnam – Fast, not furious, growth”.
“Vietnam expanded 7.1 per cent in H1, moderating mildly in Q2 after a record 7.4 per cent growth year-on-year in Q1, in line with our forecast,” said Mr. Chidu Narayanan, Economist, Asia, at Standard Chartered Bank. “This is the first year since the global financial crisis that Q2 growth has been slower than Q1. We believe this is a sign of a focus on sustainable growth over the medium term. We expect H2 growth to remain robust, albeit mildly slower than in H1.”
“Vietnam is likely to remain the fastest-growing ASEAN economy in 2018 and 2019, as in 2017. We remain positive on Vietnam’s growth medium term 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, even as construction slows down on more modest growth in the real estate sector. At the same time, electronics export growth is likely to remain robust, though 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 the next two years, with registered capital of close to $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 after rising by a steady 7 per cent year-on-year in the first half. The rise of the business process outsourcing (BPO) sector, aided by a young, well-educated, low-cost workforce, should support services sector growth in the medium term.
On the FX front, Standard Chartered economists raise their USD-VND forecasts to 23,400 by end-2018 and expect a small VND depreciation in early 2019, before ending 2019 mildly stronger against the USD as positive domestic and external factors support the currency-VN Economic Times.
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