Asia Business Channel

Moody’s optimistic about Vietnam

Global credit rating and reporting company, Moody’s Investors Service, has published its latest report, “Viet Nam outlook: Resiliency amid emerging market uncertainty” and forecasts that Vietnam’s 2018 GDP growth at 6.7%, following 2017 GDP growth of 6.8%.

According to the report, Vietnam’s expansion has continued despite recent financial and trade problems, that have affected other Southeast Asian markets; and the country’s positive economic outlook is supported by steady inflows of foreign investment, a modest recovery in agriculture and growth in electronic and textile exports.

Additionally – the strong domestic market will further support growth, and 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 clip since last year.

Trade remains the primary driver for continued expansion within Vietnam, it said, providing analysis that Vietnam’s low cost of labor and comparatively young and growing population make it an attractive locale for manufacturers. The improved trade balance increased the country’s current account surplus to an estimated 6.6% of GDP in the second quarter of 2018 from 5.1% of GDP in 2017.

The report also noted that driven in part by trade tensions, multinational companies – including LG and Samsung – have been shifting some of their production capacity from China to other countries, including Viet Nam. Global trade frictions and a strengthening US dollar have hurt Vietnam’s financial market this year, although less so than other emerging markets.

Moody’s report also said that 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 also said that sound macroeconomic policy and further structural reforms are vital for continued growth in the medium and long term, and policymakers are working on stabilizing the Government’s debt load.  It expects the State Bank of Viet Nam (SBV) to maintain a neutral stance through the end of the year, and believes that the SBV wants to maintain an environment that supports foreign investment into the country.

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