Vietnam: Economy continues to expand at a stellar pace in the third quarter
September 28, 2018
The economy continued to power ahead at full steam, growing 6.9% in the third quarter in annual terms, up from 6.7% in the second quarter. An acceleration in export growth in Q3, which reflected an upturn in the FDI sector, was a key factor behind Q3’s faster pace of expansion.
Looking at a breakdown by production, the headline figure was underpinned by a pick-up in the industry and construction sector, which grew 8.6% year-on-year in Q3, up from 8.4% in Q2—the swiftest pace of expansion of all the sub-sectors. The upturn in the construction sector exceeded that of the industrial sector, which was weighed down by contraction in mining and quarrying output. A double-digit expansion in the manufacturing sector, supported by strong external demand, led the accelerated pace of expansion.
Meanwhile, growth of agricultural, forestry and fishing output came in at 3.5% in Q3, mirroring Q2’s print, thanks to sustained favorable weather conditions and the export-oriented fishery sub-sector. Conversely, the services sector lost some ground compared to the previous quarter, expanding at a slightly weaker pace of 6.9% in Q3, down from 7.1% in Q2. The strong growth of the sector was underpinned by robust expansion in the retail sector buoyed by upbeat private consumption and record tourist arrivals. The deceleration, however, was the result of slower growth in accommodation and catering services, along with the real estate sector.
While the economy continued to lure a high level of FDI in the first nine months of the year, the rise from the same period of the previous year was marginal. Newly registered capital and additional capital in the January–September period was up just 6.0% from the same period in 2017, reaching an estimated USD 13.25 billion. The economy’s strong performance is expected to spill over into the next, thanks to sustained healthy private consumption growth and solid inflows of FDI. The impact of rising U.S.–China trade tensions on the Vietnamese economy remains uncertain. While there are downside risks stemming from the trade war, the effects could be partially offset by production relocation away from China into Vietnam to avert U.S. tariffs.