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ECONOMY

Private consumption expected to be driving factor for Vietnam’s GDP growth in 2019: HSBC

Updated at Thursday, 14 Feb 2019, 14:58
The Hanoitimes - HSBC predicted Vietnam’s economy to enlarge 6.5% in 2019 and 6.3% one year later, following the 10-year high of 7.08% in 2018. The country, however, is projected to remain the fastest-growing economy in ASEAN.
Private consumption has grown bigger in Vietnam's economy, and is expected to support GDP growth this year despite weaker global demand and a slowing electronics trade cycle, according to HSBC’s latest report. 


Private consumption as a percentage of GDP has risen sharply in recent years, reaching 67.6% in 2017, stated the report, adding that a declining unemployment, rising wages, and expansion of tourism continue to drive up private consumption in 2019. 

Indeed, wage growth has been at slightly above trend as of the second quarter of 2018 over the past six years, which should fuel private consumption in the near term. 

Meanwhile, tourist arrivals have risen an average of 25% year-on-year over the last three years, as the government eased visa procedures and improved accessibility through transportation and infrastructure investments. The report expected tourism to continue to expand, potentially reaching over 17 million arrivals in 2019. 

Low unemployment, rising wages, and growing tourism should lead to continued growth in Vietnam's service sector, particularly: retail, transportation, and accommodation & food services. These are already some of the fastest growing sectors in the country as of 2018. 

The banking sector could also benefit from rising wages and the government's continued emphasis on credit growth to support the economy, but this may also pose some downside risks given declining capital adequacy ratios in most state-owned banks. 

HSBC predicted Vietnam’s GDP to grow 6.5% in 2019 and 6.3% in one year later, following the 10-year high of 7.08% in 2018. The country, however, is projected to remain the fastest-growing economy in ASEAN. 

For countries in Southeast Asia, the report suggested driving domestic demand will be key for ASEAN economies in 2019, especially in the context of slowdown in global growth and sectorial headwinds in most ASEAN exports (i.e. commodities and electronics). 

This means that export growth will likely decelerate regardless of what transpires in the trade war. Moreover, fixed investment is poised to slow for most countries in the region due to a confluence of higher interest rates, tighter domestic liquidity, changes in government policies/priorities, and political uncertainties. 

​The region’s economic growth story in 2019, therefore, will depend more particularly on sustaining private consumption. 
Hai Yen
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