Tuesday,  Jul 16, 2019,01:01 (GMT+7) 0 0
ADB lowers Vietnam’s economic growth projection
By Thuy Dung
Wednesday,  Sep 26, 2018,19:00 (GMT+7)

ADB lowers Vietnam’s economic growth projection

By Thuy Dung

Workers are seen making bicycle saddles. The Asian Development Bank (ADB) has lowered Vietnam’s economic growth projection for this year - PHOTO: DAO LOAN

HCMC - The Asian Development Bank (ADB) has projected the economic growth of Vietnam at 6.9% this year, below the 7.1% forecast in April as exports, agriculture, construction and mining may decline slightly in the second half of the year, according to the bank’s press release.

Prospects

The export growth is likely to be moderate in the near term even though Vietnam is participating in multiple free trade agreements.

By sector, agriculture may post lower growth at 2.5% than the earlier estimate and the Government’s target of 3% due to severe floods in recent months. The construction growth will be moderate as the Government intends to prevent a real estate bubble.

Meanwhile, mining output, which dipped by 1.3% in the January-June period, will continue contracting owing to aging mines and oil fields and unfavorable weather conditions.

On the other hand, the service sector may develop well thanks to rising private consumption and buoyant tourism.

ADB’s 2019 growth forecast for Vietnam remains at 6.8%.

Inflationary pressure is predicted to persist over the near term due to the increase in global oil and food prices. Therefore, ADB has revised Vietnam’s inflation rate to 4% this year and 4.5% next year, up from 3.7% and 4%, respectively, as estimated in April.

At a press conference to launch the Asian Development Outlook Update 2018 report today, September 26, Eric Sidgwick, ADB Country Director for Vietnam, said the country’s economic growth would likely hold up well in the near term thanks to steady domestic demand, improved business conditions and the stable macroeconomic environment. The increase in public capital expenditure in the second half of the year is expected to boost investment.

However, the country’s economy remains vulnerable to external and domestic challenges. The trade friction around the world could adversely impact export activities and foreign direct investment (FDI) inflows to the country.

Performance in H1

At the press conference, ADB also reported Vietnam’s business performance in the first half of the year. The country’s economy continued to perform strongly, with 7.1% gross domestic product growth, well above the 5.8% seen in the same period last year.

Eric said Vietnam’s economic growth was spurred by remarkable manufacturing expansion, bumper agriculture production, robust performance of the service sector, resilient domestic consumption and strong investment fueled by FDI and domestic enterprises.

The agriculture sector reported a 3.9% growth rate in the six-month period, while industrial production expanded by 9.3%, sharply higher than the 2.7% and 5.4% seen in the same period last year, respectively.

In addition, private consumption grew 7.2% from 7% a year earlier. Meanwhile, exports of goods and services also rose by 15.7% by volume, higher than the 14.4% seen in last year’s first half.

In the first six months, FDI commitments reached US$16.2 billion and disbursements hit an estimated US$8.4 billion, up 8.4% year-on-year.

However, the strong growth put pressure on inflation, which reached 4.7% by June.

ADB: Vietnam should enhance control over Chinese imports

HANOI – In addition to opportunities in the near term, the trade war between the United States and China may negatively affect Vietnam as Chinese products may be exported stateside under the guise of Vietnamese goods, said Eric Sidgwick, Asian Development Bank (ADB) Country Director for Vietnam.

Vietnam could benefit if the United States seeks alternative supply chains and U.S. consumers choose substitute goods from Vietnam.

However, Vietnam has an open economy that is heavily reliant on exports. Chinese products subject to high import duties in the United States could be channeled into Vietnam before being exported stateside.

Pham Thi Quynh Loi, deputy head of the Trade and Service Statistics Department under the General Statistics Office, at a recent meeting, said the trade war between the world’s two largest economies had yet to influence Vietnam’s trade activities.

In the first half of the year, the country enjoyed a higher trade surplus with the United States than in the same period last year, Loi added.

If trade tensions between the United States and China increase, Vietnam may be affected. However, Vietnamese enterprises would then have greater chance of shipping their products stateside.

Nevertheless, Loi recommended domestic firms study the United States’ requirements on imports and step up control over Chinese product inflows to Vietnam.

At the ADB press conference, Nguyen Minh Cuong, an economic expert, said Vietnam’s economy will likely develop well in the near term thanks to high local demand. However, growth moderation in the European Union, Japan and China may dent export opportunities for Vietnam, while escalating trade friction around the world threatens to disrupt global value chains and the production network in which Vietnam is deeply integrated.

 

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