Vietnam's private consumption growth will remain strong, supported by improvements in the labour market as youth unemployment falls, minimum wages grow and lower inﬂation levels prevail, experts forecast.
|Customers buy fruit and vegetables at the Saigon Co.opmart supermarket on Nguyen Trai street in Hanoi|
Finance expert Nguyen Tri Hieu told Vietnam News that improvements in the country’s labour market would be the key force driving private consumption growth while lower levels of inﬂation would also boost spending.
According to reports from the General Statistics Office (GSO), labour market data for the second quarter of this year showed a decline in youth urban unemployment to 9.8 percent from 10.6 percent in the first quarter while overall urban unemployment remained stable at 3.1 percent.
Vietnam’s unemployment rate is forecast low, at 3.4 percent of the total labour force in 2019 for all demographic groups, remaining constant from 2018. This level is projected to be retained over medium terms to 2023.
The continued structural shift in manufacturing facilities from China to Vietnam, which is being expedited by uncertainty from the US-China trade war and the signing of the EU-Vietnam Free Trade Agreement on June 30 this year, has also provided a boost to the Vietnamese economy and improves the employment outlook.
Besides, further underpinning the positive consumer outlook is the fact that minimum wage growth continues to increase, albeit at a slower rate.
After a growth of 7.3 percent and 6.5 percent recorded in 2017 and 2018 respectively, the National Wage Council has continually increased the minimum wage by average of 5.3 percent in 2019. In 2019, minimum wages range from 2.92 million VND (125 USD) to 4.2 million VND, compared with 2.8 million VND and 4.0 million VND of 2018.
“Consumption of local people, especially the young, has been increasing significantly, given by the rising incomes and enhanced living standards,” Hieu said.
According to Euromonitor, per capita disposable income was at more than 40 million VND last year and expects an average growth of 5.9 percent annually in the 2019-30 period, leading to corresponding growth of consumer spending.
The middle-income class is also increasing rapidly and it was forecast that 49 percent of households will have an annual disposable income of between 5,000 USD and 15,000 USD, up from 33.8 percent in 2018.
Meanwhile, the country’s inflationary pressures remain under control, providing further stimulus for spending.
GSO data showed that the country’s inflation cooled to 2.57 percent in August 2019, down from 3.52 percent in August 2018. The rate was the lowest rise for the past three years.
In 2019, inflation is projected to average at 2.9 percent, buoyed by weak transport inflation due to a drop in average oil prices in the year.
The factors highlighted above are already having a positive impact on retail sales. In the GSO’s data release, retail sales grew by 11.6 percent in July 2019, up from 11.1 percent in July 2018.
Indicative of an improving outlook over 2019 is the broader uptick in retail sales, with growth of 11.9 percent average annually over the ﬁrst seven months of 2019, up from the 10.2 percent over the same period in 2018.
Analysts from Fitch Solutions Macro Research recently also forecast although slightly cooling this year, private consumption growth in Vietnam would remain robust, expanding by 6.5 percent in 2019 and picking up further to 6.8 percent in 2020.
“Retail sales in Vietnam have recorded double-digit growth rates and we expect this to hold over 2019. We highlight Vietnam as one of the most promising consumer markets in Asia Paciﬁc, along with Indonesia, the Philippines, India and China,” Fitch analysts noted.
According to Hieu, local consumption will continually support Vietnam’s economic growth, especially when the global market slows and is becoming volatile.
“Robust domestic consumption will be an important driver for the country’s growth and help reduce dependence on exports,” Hieu said./. VNA/VNS
Vietnam’s fiscal deficit, including principal repayments, would come in at 6.6 per cent of GDP in 2019 and 2020, up from 5.9 per cent in 2018, Fitch Solutions Macro Research forecast.
Vietnamese income has improved significantly, but it has not reached the $3,000per capita threshold as calculated by General Statistics Office, economists say.