Vietnam economy breaks glass ceiling

According to the “Economic Insight: Southeast Asia” report for the third quarter of 2016, released early last week by the Institute of Chartered Accountants in England and Wales and Oxford Economics, Vietnam’s GDP growth is forecast at 6.5% in 2016, climbing towards 7% next year.

These rates are far higher than the average increases of 4.5% in 2016 and 4.7% in 2017 throughout ASEAN-6 (Singapore, Thailand, Malaysia, Indonesia, the Philippines, and Vietnam).

“Looking forward, Vietnam is likely to be the standout performer in terms of GDP growth in the ASEAN region,” said the report.

According to the report, weak oil revenues and depressed agricultural outputs from rainfall have slightly constrained growth in the first half of 2016. But manufacturing output grew robustly, and confidence in the sector is largely buoyed by inward foreign direct investment (FDI) and recent trade deals.

The Asian Development Bank (ADB) said though it is revising down Vietnam’s GDP growth for 2016 and 2017, such growth still places it among the top performers in Southeast Asia. The ADB indicated that Vietnam’s slow growth might be contained to the short-term.

This week, the bank will release its update on Vietnam’s nine-month economic situation. In this update, Vietnam’s growth forecast is likely to be revised down to below 6.3% for 2016, and is expected to stay at only 6.3% for next year.

Early last month, the ADB downgraded the country’s growth rate to 6.3% for 2016 and 6.5% for 2017.

Trading Economics, a world-famous provider of economic analysis for the governments and firms of nearly 200 countries, last week predicted that Vietnam’s GDP growth rate was expected to be only 6.2% in this year’s third quarter, and just 6.4% for the whole year.

However, according to these organizations, the country’s slower-than-expected growth does not mean Vietnam’s economic momentum is weak. On the contrary, the country’s manufacturing and FDI are bouncing back strongly.

New FDI pledges in the January-September period is expected to surge 45% year-on-year to US$15 billion, with most of the funds going to manufacturing, processing, and real estate projects.

From January 1 to August 20, 2016, Vietnam lured 1,619 FDI projects registered at US$14.37 billion.

The ADB said Vietnam’s merchandise export earnings should rise by 10% this year and 14% in 2017, as new production from foreign-invested factories comes online and trade agreements take effect.

Imports will also continue to grow in response to strong demand for both consumer and capital goods, and in supplying inputs for manufacturing.

Deloitte’s 2016 Global Manufacturing Competitiveness Index found that Vietnam is now in the world’s top 20 most competitive manufacturing locations, and is set to climb further in the years ahead.

This success has underpinned trade flows, as well as job creation, business investment, and consumer spending.