Vietnam: Economy grows at the fastest pace in over ten years in Q4
December 27, 2017
The economy grew at the quickest stride in over ten years in the final quarter of last year, accelerating over the previous quarter’s performance. GDP growth vaulted to 7.7% in annual terms following a 7.5% year-on-year expansion in the third quarter. A strong performance in H2 made amends for the economy’s tepid start to the year, enabling the government to exceed it’s full-year GDP growth target of 6.7% in 2017; estimates show the economy grew 6.8% in the year.
A robust expansion in almost all of the principal sectors of the economy drove the upturn in Q4. Industrial production accelerated strongly in the quarter, growing at a double-digit pace (Q4: +14.4% year-on-year; Q3: +9.7% yoy) thanks to rapid growth in the manufacturing sector. The manufacturing sector’s stellar performance supported a 21.1% jump in exports in the year. Mining and quarrying contracted sharply for the seventh consecutive month as the impact of a natural resources tax and drop in oil output from mature oil fields continued to weigh down on the sector’s performance. Over the 12 months, the services sector perked up, expanding 7.4%, up marginally from a 7.3% annual rise in the first nine months of the year. An across-the-board increase in all sub-components propelled the robust print. Growth in the agriculture, forestry and fishing sector remained comparatively sluggish, coming in at 2.9% in the 12 months (January–September: +2.8% yoy). The agriculture sector’s recovery from 2016’s debilitating drought is ongoing and should spur a pick-up in food production in upcoming months.
Foreign direct investment inflows, which rose to a record high in 2017, are expected to surge again in 2018 and catalyze a faster rate of economic expansion as the economy diversifies into high-value-added sectors, such as high-tech, financial services, pharmaceuticals, environmentally-friendly projects. A sustained rapid growth in private sector credit will continue to prop up private consumption. Moreover, the government will be stepping up measures to restructure the banking system as well as tackling outstanding volume of non-performing loans.
Author: Nihad Ahmed, Economist