The Asian Development Bank (ADB) released a report recently that forecasts that Vietnam’s economy will slow down slightly this year and next, but the ADB says that Vietnam is a standout economy in Asia with stable development thanks to resilient domestic demand and sustained inflows of foreign direct investment (FDI).
In its Asian Development Outlook 2019, the bank retained its growth forecast for Vietnam at 6.8% in 2019, and economic growth 6.7% in 2020.
According to ADB projections, Vietnam’s growth has outperformed projection for the average growth of developing economies in Asia (excluding Hong Kong, Taiwan, Singapore and Republic of Korea), which have been revised down from 5.7% to 5.4% in 2019, and from 5.6% to 5.5% in 2020.
Eric Sidgwick, ADB’s Country Director for Vietnam said that, “Despite a slowdown in export growth due to the escalation of the trade conflict between the United States and the People’s Republic of China and the consequent downturn in global trade, the Vietnamese economy remains healthy thanks to continued strength in domestic demand and sustained inflows of foreign direct investment.”
Vietnam’s GDP grew 6.8% in the first half this year, but the decline in the export of goods and services from 15.7% in the first six months of 2018, to 7.1% in the corresponding period this year, due to weak external demand.
The ADB report also noted that the effects of an export slowdowns has been negated by continued domestic demand. Private consumption expanded 7.2% in the first half of 2018, and the same 7.2% rate has continued this year.
The ADB also noted the Vietnamese governments efforts to improve the business environment, and recent upward revisions to the country’s sovereign credit ratings, and believes that these factors will contribute to continued private and foreign investment.
If the US-China trade conflict continued to escalate, more manufacturers may consider Viet Nam as an alternative base, providing fresh impetus to FDI inflows, it said. Additionally, the regional Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the recent signing of the free trade agreement with the European Union promised to further open market access for trade and investment.
The ADB says that the outlook for industry and services remained positive, but one key sector that is facing difficulty is agriculture and farming. In the first half of this year, agriculture growth was down from 3.8% in 2018 to 2.4% this year.
Sidgwick of the ADB noted that, “They [farmers] are worrying a lot more about farm production which is being affected by issues related to climate change. They find it hard to predict the weather; and extreme weather such as floods and droughts make their lives much more difficult.”
In order to overcome their difficulties, the ADB suggests that farmers apply advanced technology in agriculture and improve product quality as the demand from consumers for safe products is rising and many countries are now employing high safety standards as non-tariff barriers.