Econ
Vietnam's macro economy: Improved but unstable
The year of 2016 went through 2/3 of the time, since the implementation of this period, it can be seen that Vietnam`s macro economy is improved a step, but still unstable.
Vietnam, Indonesia and the Philippines are forecast to be economic drivers of the Association of Southeast Asian Nations (ASEAN) in 2016 and 2017, a Moody’s report said in its growth Outlook of ASEAN Economies to Emerge in 2016 and 2017.
The report said growth in the region is expected to be subdued due to lower global demand affecting the export-oriented countries in the region. Vietnam’s credit profile is supported by its robust economic growth and diversified economy, according to Moody’s Investors Service.
These credit strengths are balanced against accelerating credit growth, wide fiscal deficits and an increasing government debt burden. At the same time, while the operating environment for the banking sector has stabilised, capital levels remain inadequate and asset quality is still weak.
Moody’s conclusions were mentioned in its just-released annual credit analysis of Government of Vietnam. The report elaborates on Vietnam’s credit profile in terms of Economic Strength: High (-); Institutional Strength: Low; Fiscal Strength: Low (+); and Susceptibility to Event Risk: High, which are the four main analytic factors under Moody’s Sovereign Bond Rating Methodology.
Over the last two years, GDP growth in Vietnam has picked up to above 6.0 percent, which stands in contrast to slower growth across much of the region as well as among rating peers. Moody’s forecasts real GDP growth to remain around 6.0 percent in the next two years.
According to Moody’s, stronger domestic demand has prompted healthier demand for imports. As a result, the current account surplus has declined and Moody’s forecasts a small surplus of 0.6 percent in 2016. Nevertheless, with the central bank’s new exchange rate mechanism, Moody’s still expects the balance of payments to be in a healthy surplus with a net accretion of foreign exchange reserves.
The growth prospects of ASEAN’s major export-orientated economies, namely Singapore , Malaysia and Thailand, will remain weaker than those of more domestic demand-driven economies, Indonesia and the Philippines , in 2016 and 2017, said Rahul Ghosh, Moody’s Vice President and senior research analyst.
Moody’s also pointed to Vietnam as a regional growth outperformer toward 2017 on the back of robust manufacturing activity and strong foreign direct investment flows. Moody’s said export growth is slumping across the region, but its economic impact will vary according to the countries’ dependence on trade, as indicated by its trade to GDP ratio.
Vietnam is becoming a more important location in regional cross-border production networks for electronic goods. Moody's said Vietnam banking system had stabilised and risks to the Government's balance sheet were likely to remain limited. However, the firm noted that the overhang from a decade-long credit boom - as manifested in the still large stock of non-performing loans (NPLs) - continued to constrain the banking sector.
