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Moody’s upbeat on Vietnam’s economic outlook
By Thanh Thom
Friday,  Oct 26, 2018,16:33 (GMT+7)

Moody’s upbeat on Vietnam’s economic outlook

By Thanh Thom

File photo of a container ship making a port call in Ba Ria-Vung Tau Province. Vietnam’s expansion has charged ahead despite the recent financial and trade turmoil, according to Moody’s Investors Service - PHOTO: TL

HCMC – Vietnam’s expansion has charged ahead despite the recent financial and trade turmoil, which has affected Southeast Asian emerging markets, Moody’s Investors Service said in a recently released report.

In its report, “Vietnam Outlook: Resiliency Amid Uncertainty,” Moody’s said the Vietnamese economy remains one of the premier emerging markets in Southeast Asia. Following the real gross domestic product (GDP) growth of 6.8% in 2017, its GDP is seen continuing to expand 6.7% this year.

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

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

Trade remains the primary driver for continued expansion in Vietnam, it said, suggesting that Vietnam’s low cost of labor 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% of GDP in the second quarter of 2018 from 5.1% of GDP in 2017.

Driven partly by the escalating trade tensions between China and the United States, multinational companies, such as LG Electronics and Samsung of South Korea, have been shifting some production from China to other countries, including Vietnam, the report noted.

However, global trade frictions and a strengthening of the U.S. dollar have hurt Vietnam’s financial market this year, but less so than other emerging markets.

Moody’s projected that Vietnam’s current account surplus and large foreign reserves would further position the economy better than other emerging markets facing widening current account deficits.

Moody’s expected the State Bank of Vietnam to maintain a neutral monetary policy through the end of the year, deviating from a handful of other central banks in Asia.

The central bank is largely content with how economic conditions are playing out this year and wants to maintain an environment that supports foreign investment in the country, it pointed out.

However, the central bank may shift to a more aggressive stance if pricing pressures intensify.

Moody’s said that sound macroeconomic policy and further structural reforms are vital for continued growth in the medium and long terms. Policymakers are working on stabilizing the Government’s debt load, as Vietnam’s public debt rose to an estimated 63.7% of GDP last year.

Founded in 1999, Moody's Investors Service is a bond credit rating business that provides research, credit rating and financial risk analysis services. Moody’s, along with Standard & Poor’s and Fitch Group, is regarded as one of the Big Three credit ratings agencies.

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