Vietnam economy forecast to grow by more than 7% in 2019

Low productivity poses risks to Vietnam economy

The manufacturing sector ended 2018 being the bright spot of Vietnam’s economy, and is expected to achieve higher growth this year amid uncertainties surrounding the world economy, the governmental portal reported.

In 2018, manufacturing remained the driving force of the economy with an increase of 12.98% year-on-year, contributing 2.55 percentage points to Vietnam’s 10-year high economic growth of 7.08%.

Vietnam’s exports of industrial goods reached US$201.7 billion, up 15.7% year-on-year and accounting for 82.8% of total exports. Of the total, 22 categories of goods recorded over US$1 billion in export revenue, including phones and accessories worth US$49 billion, textile US$30.5 billion, computers, electronic devices US$29.3 billion, equipment and parts US$16.5 billion, footwear US$16.2 billion, transportation vehicles US$7.9 billion, camera and parts US$5.2 billion, steels US$4.5 billion and fiber US$4 billion.

Among those goods, the Ministry of Industry and Trade (MoIT) reckons the textile and garment industry has much room for growth in 2019. The sector grew by 16.7% year-on-year to reach export turnover of US$30.5 billion, in which almost all major markets witnessed strong growth, including the US with 11.6%, Japan 22.6%, South Korea 24.9%, China 39.6% and the EU 9.9%.

Vice Minister of Industry and Trade Tran Quoc Khanh said uncertainties surrounding the US – China trade tension as well as impacts of free trade agreements (FTAs) are having positive implications on Vietnam’s exports. However, there remain concerns over potential changes in economic policies from countries applying trade protection measures, Khanh added.

Additionally, footwear exports are expected to boom in the coming time, mainly thanks to the upcoming signing of the EU – Vietnam FTA (EVFTA), especially as Vietnam is currently the world’s second largest footwear exporter, behind China.

Phan Thi Thanh Xuan, general secretary of the Leather, Footwear and Handbag Association (LEFASO), said the sector targets export growth of 10% year-on-year to US$21.5 billion in 2019.

Xuan attributed greater outlook of the sector to increasing demand in Vietnam’s major markets, while China is shifting its investment priority on high tech sectors, instead of labor-intensive fields.

However, Vice Minister Khanh said the added value of the sector is still at modest level due to the low integration of domestic enterprises in the global value chain.

Statistics from the MoIT revealed phones and parts claimed the top spot among Vietnam’s export staples, reaching US$49 billion, marking a 12.63% year-on-year increase.

Such high growth was thanks to significant contribution from the FDI sector, such as Samsung or LG, while local tech companies remain weak in terms of technology application and production capacity.

Vice Minister of Industry and Trade Hoang Quoc Vuong said the important point is to shift the structure of the industrial sector towards the development of processing and manufacturing, instead of assembling and outsourcing, while facilitating the growth of support industries and a greater localization rate.

In 2019, the MoIT targeted the growth of Vietnam’s index of industrial production (IIP) at 9 – 10% year-on-year, that of the manufacturing at 13% and mining down 9%.

Hanoitimes