The ADB released an update of its flagship annual economic publication, Asian Development Outlook (ADO) 2018, at a press conference in Hanoi on September 26.
Vietnam maintained a 7.1% growth in the first half of 2018, compared to 5.8% in the same period last year. During the period, rising income lifted private consumption growth to 7.2% from 7.0% a year earlier. Private investment remained robust, supported by high credit growth and strong foreign direct investment.
The volume of goods and services exports rose by 15.7% from the 14.4% recorded last year. Strength in exports, domestic private consumption, and investment offset deceleration in government consumption and public investment that resulted from fiscal consolidation.
Most major sectors continued to perform solidly. Output from agriculture and allied activities grew by 3.9%, compared to 2.7% last year. Industrial production expanded by 9.3%, sharply higher than 2017 first half’s 5.4% expansion. Acceleration in industry offset moderation in construction, as measures took hold to curb bank lending to real estate.
Driven partly by a hefty rise in international tourist arrivals, the service sector posted nearly 7% growth, the same pace as last year.
ADB forecasts Vietnam will grow 6.9% this year, slightly lower than the 7.1% projected in April, as local exports, agriculture, construction, and mining are expected to moderate in the second half of the year. It retains the 2019 growth forecast for Vietnam at 6.8%.
“The economic performance was broad-based, driven by vigorous manufacturing expansion, bumper agriculture production, robust performance of services sector, resilient domestic consumption, and strong investment fueled by FDI and domestic enterprises,” said ADB Country Director for Vietnam Eric Sidgwick.
Vietnam’s economic growth is likely to hold up well in the near term thanked to resilient domestic demand, improved business conditions, and stable macroeconomic environment. An anticipated increase in public capital expenditure in the second half of the year is expected to boost investment growth.
The economy, however, remains vulnerable to external and domestic challenges. Growth moderation in the major economies such as China, European Union, and Japan may dampen aggregated demand of global trade. The escalating trade frictions around the world could adversely impact the export performance and FDI inflows to Vietnam. Inflationary pressure is likely to persist over the near term because of an increase in international oil prices and an upsurge in food prices.
Therefore, ADB has revised forecast for local inflation rate to 4% in 2018 and 4.5% in 2019, up from the April estimates of 3.7% and 4%, respectively.