Vietnam: Economy continues expanding at robust pace in Q1
March 30, 2018
The economy continued to grow at a stellar, albeit slightly slower, pace in the first quarter of the year, after expanding at an over 10-year high rate in the previous quarter. GDP growth moderated in year-on-year terms from 7.7% in Q4 2017 to 7.4% in Q1. Vietnam remains among the world’s fastest growing economies thanks to flourishing exports, high inflows of foreign direct investment (FDI) and a thriving tourism sector.
Looking at a breakdown by production, reported in cumulative terms, all three major sectors expanded in the first quarter. The industry and construction sector registered the brightest performance, expanding 9.7% yoy in the January–March period, up from 8.0% yoy in the January–December period of last year. An upturn in the industrial sector was behind the improved reading. A stellar 22.0% yoy expansion in exports in the January–March 2018 period, slightly up from 21.1% yoy growth in January–December 2017 period, translated into robust growth in the manufacturing sector. The agriculture, forestry and fishing sector also picked up, with 4.1% yoy growth in the three-month period, from 2.9% yoy in the 12-month period. Agricultural output was set back by a drought in 2016 but has been recovering, which should continue to see higher food production. The services sector lost some ground, however, with the pace of expansion moderating to 6.7% yoy in January–March 2018, from 7.4% yoy in the January–December 2017 period.
While FDI inflows remained elevated, they fell by a quarter in January–March period 2018 compared to the same period of last year and disbursement of foreign funds grew slightly more moderately at a rate of 7.2% yoy (January–December 2017: +10.8% yoy), reaching USD 3.88 billion. A robust inflow of overseas funds is expected again this year amid improved business conditions. It should continue supporting growth as the government attempts to diversify the economy into high-value added areas. Moreover, rapid credit growth should keep private consumption on a healthy course. For this year, the government is targeting a growth rate of 6.5%–6.7%.
Panelists participating in the FocusEconomics Consensus Forecast expect GDP to expand 6.6% in 2018, which is down 0.1 percentage points from last month’s forecast. The panel foresees GDP growing 6.5% in 2019.
Author: Nihad Ahmed, Economist