Although slightly cooling this year, private consumption growth in Vietnam will remain robust, helping the country become one of the most promising consumer markets in Asia Pacific, experts have forecast.
Vietnam’s retail sales value reached US$137.4 billion in the first eight months of 2019.
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“Retail sales in Vietnam have recorded double-digit growth rates and we expect this to hold over 2019. We highlight Vietnam as one of the most promising consumer markets in Asia Pacific, along with Indonesia, the Philippines, India and China,” Fitch analysts noted.
In fact, Vietnam’s retail sales have seen strong growth so far this year. According to the latest data released by the General Statistics Office (GSO), the country’s total revenues for retail sales reached US$137.4 billion in the first eight months of 2019, up 11.5% year on year.
GSO officials said that this positive growth proves the rising demand of local people.
According to experts, the rising demands have been supported by improvements in the labor market as youth unemployment falls, minimum wages grow and lower inflation levels prevail, experts said.
“Improvements in the country’s labor market will be the key force driving private consumption growth while lower levels of inflation will also boost spending,” Fitch analysts said.
GSO reported that labor market data for the second quarter of this year showed a decline in youth urban unemployment to 9.8% from 10.6% in the first quarter while overall urban unemployment remained stable at 3.1%.
Vietnam’s unemployment rate is forecast to remain low, at 3.4% of the total labor force in 2019 for all demographic groups, remaining constant from 2018. This level is projected to remain stable over medium terms to 2023.
The continued structural shift in manufacturing facilities from China to Vietnam, which is being expedited by uncertainty from the US-China trade war and the signing of the EU-Vietnam Free Trade Agreement on June 30 this year, has also provided a boost to the Vietnamese economy and improves the employment outlook.
Supporting factors
Further underpinning the Vietnamese positive consumer outlook in 2019 is the fact that minimum wage growth continues, albeit at a slower rate.
After a growth of 7.3% and 6.5% recorded in 2017 and 2018 respectively, the National Wage Council has continually increased the minimum wage by average of 5.3% in 2019. In 2019, minimum wages range from VND2.92 million (US$125) to VND4.2 million, compared with VND2.8 million and VND4.0 million of 2018.
According to banking expert Nguyen Tri Hieu, consumption of local people, especially the young, has been increasing significantly, given by the rising incomes and enhanced living standards.
Market research provider Euromonitor also reported that Vietnam’s per capita disposable income was at more than VND40 million last year and expects an average growth of 5.9% annually in the 2019-2030 period, leading to corresponding growth of consumer spending.
The middle-income class is also expanding rapidly and it was forecast that 49% of households will have an annual disposable income of between US$5,000 and US$15,000, up from 33.8% in 2018.
Meanwhile, the country’s inflationary pressures remain under control, providing further stimulus for spending.
GSO data showed that the country’s inflation cooled to 2.57% in August 2019, down from 3.52% in August 2018. The rate was the lowest for the same month in the past three years.
In 2019, inflation is projected to average at 2.9%, buoyed by weak transport inflation due to a drop in average oil prices in the year.
