Moody’s optimistic about Vietnam’s economic outlook

Vietnam’s expansion has charged ahead despite the recent financial and trade turmoil, which has affected many Southeast Asian emerging markets, Moody’s Investors Service said in a recently-announced report.  
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In its report “Vietnam Outlook: Resiliency Amid Emerging Market Uncertainty”, Moody’s said following 6.8 percent real GDP growth in 2017, Vietnam’s GDP growth will continuously maintain an expansion of 6.7 percent in 2018.

moodys optimistic about vietnams economic outlook

According to the report, the positive economic outlook is supported by burgeoning electronic and textile exports, a modest recovery in agriculture, and steady inflows of foreign investment.

Additionally – unlike in years past – a strong domestic market will further support headline growth, it said, adding that with tourism traffic at a record high in the first nine months of this year and a healthy labour market, consumer sales have been rising at a double-digit clip since last year.

Trade remains the primary driver for continued expansion within Vietnam, it said, giving analysis that Vietnam’s low cost of labour and comparatively young and growing population make it an attractive locale for manufacturers.

As a result, the improved trade balance increased Vietnam’s current account surplus to an estimated 6.6 percent of GDP in the second quarter of 2018 from 5.1 percent of GDP in 2017.

Driven in part by the trade tensions, multinational companies – including LG and Samsung - have been shifting some production from China to other areas, including Vietnam, the report noted.

However, global trade frictions and a strengthening USD have hurt Vietnam’s financial market this year, although less so than other emerging markets.

Moody’s said Vietnam’s current account surplus and large foreign reserves will continue to position the economy better than other emerging markets facing widening current account deficits.

Moody’s said it expects the State Bank of Vietnam (SBV) to maintain a neutral stance through the end of the year, deviating from a handful of other central banks in Asia.

SBV is largely content with how economic conditions are playing out this year, and wants to maintain an environment that supports foreign investment into the country, it noted.

According Moody’s,  sound macroeconomic policy and further structural reforms are vital for continued growth in the medium and long term, and policymakers are working on stabilising the Government’s debt load, as Vietnam’s public debt rose to an estimated 63.7 of GDP in 2017.

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(Source: VNA)