Vietnam: Economy grows at a stellar pace in the first six months of the year
June 29, 2018
The economy expanded 7.1% over the same period of the previous year in the January–June period, slightly down from the 7.5% expansion recorded in January–March, as growth in the second quarter decelerated to 6.8%. Among the fastest-growing economies worldwide, Vietnam has been powered by thriving exports, a surge in foreign direct investment (FDI) and a buoyant tourism sector.
A breakdown by production, reported in cumulative terms, shows that all key sectors expanded in the first six months of the year. The industry and construction sector expanded at a marked pace of 9.1% in the period (January–March: +9.7% year-on-year). The industrial sector grew at a robust pace, thanks to solid growth in exports, which translated into a notable upturn in manufacturing output. Moreover, the construction sector also posted healthy growth. Services grew at a slightly swifter rate of 6.9% in the January–June period, marginally up from 6.7% in the January–March period. Among subcomponents, wholesale and retail trade; and repair of automobile, motorcycles and other motor vehicles rose at the strongest pace. Meanwhile, the agriculture, forestry and fishing sector grew at a more moderate stride of 3.9%, following growth of 4.1% in the first three-month period of the year.
Recent government data showed that FDI in the first half of the year has already surpassed the figure for all of 2017: Realized FDI surged 8.4% compared to the same period of last year, reaching USD 8.37 billion. Robust inflows of overseas funds come amid favorable business conditions, which should continue supporting growth as the government attempts to diversify into high-value added areas. With FDI constituting a long-term investment decision, intensifying trade tensions between China and the U.S. are likely steering more overseas investment into Vietnam as an alternative destination to China for investors.
Author: Nihad Ahmed, Economist