Vietnam: Economic growth soars in Q4, rounding off a robust 2018
December 28, 2018
Economic momentum surged through the end of 2018 with the Vietnamese economy posting stellar 7.3% growth in annual terms in the fourth quarter, up from the revised 6.8% expansion recorded in the third quarter (previously reported: +6.9% year-on-year). The economy grew a striking 7.1% in 2018, marking the best performance in a decade (2017: +6.8% yoy).
The remarkable performance was underpinned by vigorous growth in the services sector which grew 7.6% in Q4 (Q3: +6.5% yoy). Service-sector growth was particularly strong in the accommodation and catering, and retail trade subsectors, which were buttressed by sustained tourist arrivals. In addition, a notable uptick in the real estate sector was likely boosted by FDI inflows. Meanwhile, growth of agricultural, forestry and fishing output came in at 3.9% in Q4 (Q3: +3.6% yoy), thanks to favorable weather conditions and the export-oriented fishery sub-sector. Growth in the industry and construction sector also remained upbeat in Q4 (Q4: +8.7% yoy; Q3: +8.8% yoy), with manufacturing production posting solid growth and construction activity increasing at a quick clip.
The FDI sector also played a key role in the growth seen in 2018. Vietnam attracted healthy levels of FDI, luring nearly 500 more projects than in the prior year, although registered capital in 2018 was down 15.5% from the previous year in USD value terms (2018: USD 17.98 billion). Looking ahead, the solid momentum is expected to carry over into 2019, although will likely soften somewhat. FDI and the export-oriented sectors should continue to power growth. Participation in free trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership should see a fresh rush of inflows. Private consumption should also remain robust, driven in part by a healthy tourism sector and also by a tighter labor market.
Author: Lindsey Ice, Economist