Vietnam: Industrial production surges in February on favorable base effect; underlying momentum moderates
Industrial production expanded 23.7% year-on-year in February, contrasting January’s revised 8.0% contraction (previously reported: -5.5% year-on-year). However, February’s reading was distorted by the Lunar New Year holiday, which last year fell in February, creating a favorable base of comparison. Looking at data for the first two months to remove holiday distortions points to weaker momentum; growth averaged 6.2% compared to an average of 9.1% last year, with activity hit by the coronavirus outbreak in China.
Looking ahead, industrial production will likely remain under pressure in coming months due to the virus. However, momentum should recover in the medium-term, and the underlying strength of Vietnam’s industrial sector remains intact: Vietnam is an attractive low-cost base for manufacturing firms, including those looking to relocate from China due to the U.S.-China trade spat, thanks to a cheap workforce and business-friendly government.