Vietnam: Economy gains steam in Q3, underpinned by manufacturing and services
September 29, 2019
Economic growth picked up to 7.3% in the third quarter from 6.7% in the second quarter, according to recent data released by Vietnam’s Statistical Institute, markedly overshooting market expectations. The third quarter’s expansion was likely among the fastest—if not the fastest—in the whole of ASEAN.
The acceleration was driven in part by faster industrial activity growth (Q3: +10.1% year-on-year; Q2: +9.1% yoy), propelled by a buoyant manufacturing sector. The services sector also picked up pace (Q3: +7.1% yoy; Q2: +6.9% yoy), likely supported by healthy labor market dynamics, mild inflation and surging tourism inflows. However, the agricultural sector lost steam (Q3: +1.5% yoy; Q2: +2.0% yoy), weighed on by drought and African swine fever slashing pig populations.
Looking ahead, growth should remain well above the ASEAN average, supported by buoyant domestic demand, FDI, manufacturing and a blossoming tourism sector. However, the country’s open economy remains vulnerable to a synchronized global slowdown. The U.S.-China trade war poses both risks and opportunities; while Vietnam should benefit somewhat from trade diversion from China, the conflict could also reduce global growth, weighing on the external sector.
Author: Oliver Reynolds, Economist