Vietnam at a glance Oct 2017
Growth above expectations

Vietnam’s 3Q GDP grew at an impressive pace of 7.5% y-o-y (prev: 6.4%) and 6.4% YTD y-o-y (prev: 5.7%)

Meanwhile, the manufacturing PMI indicates further strengthening of growth, climbing to 53.3 in September (prev: 51.8)

Headline CPI bottomed out, rising 3.4% y-o-y in September due to higher healthcare and oil prices (prev. 3.4%)

Growing in rarefied air: Vietnam’s economy expanded 7.5% y-o-y in 3Q17 to reach 6.4% YTD y-o-y, just short of the government’s full-year target of 6.7%. This marks the first time since 2010 that Vietnam exceeded the 7% growth threshold, fuelled by a continued rise in exports and industrial production. Higher tourist arrivals, FDI, and agricultural production also provided an additional lift to growth. With the most recent reading, we revise up our GDP forecast to 6.6% in 2017 and continue to expect growth of 6.4% in 2018 (see: Asian Economics Quarterly: Takin’ it down a notch).

Less heavy-lifting for policymakers: The strong 3Q print also eases any pressure on the government and the State Bank of Vietnam (SBV) to provide additional stimulus for the economy, which poses its own risks. Growth should remain robust in 4Q as manufacturing, tourism, FDI, and agriculture all continue to expand. Given the recent trend, we expect both tourism and FDI to exceed last year’s figures.

PMI showing clear horizons: Vietnam’s manufacturing sector just contributed its highest level to growth in at least 10 years. Moreover, the most recent PMI indicates that this momentum is likely to improve as the year comes to a close. The September PMI expanded to 53.3 from 51.8 in the previous month, fuelled by higher new orders and employment, thus supporting our view that Vietnam’s growth will remain robust as the year ends.

Prices are looking up: Higher oil and healthcare prices have lifted inflation for two months in a row, stemming six consecutive months of cooling prices. Notably, transport prices rose 6.7% y-o-y in September from 5.7% in August, while healthcare costs continue to rise at a fast clip (42.4% y-o-y) from the government’s healthcare subsidy reforms. We expect headline CPI to average 3.5% in 2017 and 2018.

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