Vietnam GDP called robust, growth expected
Vietnam’s GDP growth is forecast to be robust in 2016 and 2017, possibly outperforming other countries in the region, according to international banks.
In a report released last week, ANZ expects Vietnam’s GDP to rise 6.9% in 2016 and 6.5% in 2017.
“Yet we acknowledge the downside risks emanating from the contraction in agricultural output. Global expectations for rice output are not promising, weighing on agricultural exports,” the ANZ report says.
Early last week, Asian Development Bank (ADB)’s growth forecast for Vietnam’s GDP was robust, with predictions of 6.7% in 2016 and 6.5% in 2017.
Credit Suisse last week also said that Vietnam’s GDP would rise 6.3% next year, the third-fastest in emerging market economies after China (6.6%) and India (7.8%).
Credit Suisse said Vietnam’s growing popularity as a global manufacturing hub was one of the reasons for the growth.
Credit Suisse also expects Vietnam’s export growth to moderate slightly from 7.1% in 2015 to 6.9% in 2016 due to a recent slowdown in the United States and China’s declining appetite for imports while total foreign direct investment (FDI) reaches US$13 billion, down from a spectacular US$14.5 billion in 2015.
“The manufacturing sector, which accounts for 24% of Vietnam’s GDP, attracted 57% of the FDI inflows last year. The country stands to gain even more investment from the Trans-Pacific Partnership, a free-trade agreement among 12 countries,” Credit Suisse said.
However, according to Credit Suisse, the Vietnamese equities market still has its challenges, such as liquidity, a relatively small number of listed firms, and limits on foreign ownership.
The bank’s equities analysts are also more cautious on credit-related assets, including banks and real estate companies. An increase in non-performing loans in the wake of a credit-fuelled property bubble over the last five years has put pressure on banks’ capital ratios. If lending continues at the pace of the last several years, four of the six largest banks will have capital adequacy ratios of less than 10% by the end of 2016.