ANZ Research has kept its full-year 2019 GDP growth forecast for Vietnam unchanged at 6.7% as the Vietnam government’s commitment to broad-based economic reforms bodes well for the country’s longer term prospects.
Source: Haver, ANZ Research
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Vietnam’s gross domestic product growth in the first half of 2019 was solid, particularly considering the downturn in global trade and the impact of African swine fever on the agriculture sector.
ANZ Research predicted Vietnam’s inflation to remain manageable, averaging 2.8% this year, below the State Bank of Vietnam’s 4% target, which would result in monetary policy being on hold this year.
As Vietnam continues to reap the benefits of past reforms and commit to further ongoing reforms, the country is on track to double its per capita gross national income from US$2,400 in 2018 to US$4,800 by 2028, graduating to upper middle income status, Goh added.
Vietnam has managed to avoid the deeper slowdown seen in other Asian economies thanks to continued foreign direct investment (FDI) flows and export growth - which also bucks the regional trend.
Actual FDI totaled US$10.55 billion in the first seven months this year, representing an increase of 6.63% year-on-year, although FDI commitments were down 13.45% year-on-year US$20.2 billion in the period, according to statistics of the investment ministry.
While Vietnam is seen as a beneficiary of the US-China trade tensions, there is a need to manage the strong FDI inflows to ensure adequate resource allocation while preventing overheating, the economist said.
“The government’s shift towards a focus on attracting new-generation FDI is essential to ensure sustainable economic development.”
However, the rising trade surplus with the US is starting to attract attention. Vietnam has been placed on the US Treasury’s Monitoring List and there could be pressure to allow the Vietnamese dong (VND) to become more flexible.
ANZ Research does not expect Vietnam to be labelled a currency manipulator as the VND has largely been moving in line with regional currencies. But there is a need for the country to continue to build its foreign exchange reserves given the low adequacy level at present.
