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Oct 05, 2018 / 20:06

Vietnam expected to remain fastest-growing ASEAN economy in 2018: StanChart

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.

Vietnam’s robust GDP growth is expected to continue, reaching of 7.0% in 2018, the fastest pace among Southeast Asian nations, Standard Chartered has said in its latest report entitled “Vietnam – Fast, not furious, growth”.
 
The growth will be driven by strong FDI-supported electronics manufacturing and rising consumption. Manufacturing and agriculture are likely to remain the primary growth drivers in H2, the bank said.

“Vietnam expanded 7.1% in H1, moderating mildly in Q2 after a record 7.4% growth y/y in Q1, in line with our forecast. 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,” said Chidu Narayanan, economist of Asia, Standard Chartered Bank.

“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.”

The World Bank has retained its GDP growth estimate for Vietnam at 6.8% this year while the Asian Development Bank revised down the figure to 6.9% from the previous 7.1%.

According to Standard Chartered’s latest macro-economic research report, Vietnam’s manufacturing is projected to record another year of double-digit growth and agriculture growth will continue its recovery in H2, 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% of the economy, is likely to remain robust in H2 after rising by a steady 7.0% y/y in H1. The rise of the business process outsourcing (BPO) sector, aided by a young, well-educated, low-cost labor force, should support services sector growth in the medium term.

On forex outlook, 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.