Despite a continued downturn in the mining sector, nine-month figures show Vietnam’s economy is on a good growth trajectory.

The General Statistics Office (GSO) reported that the economy grew by 6.41 per cent in this year’s first nine months, higher than the 5.99 per cent of last year’s corresponding period. The economy grew by a record 7.46 per cent in the third quarter, up from 6.28 per cent in the second quarter, and 5.15 per cent in the first quarter.

“These figures reflect that the economy is flourishing, showing a strong rise in the economy’s manufacturing and consumption. The economy has also been buoyed by further increases in foreign direct investment and exports, domestic credit growth, and a further recovery in agriculture from the 2016 drought, as well as accelerating disbursement of capital expenditure on national infrastructure programmes,” Aaron Batten, country economist from the Asian Development Bank (ADB), told VIR.

According to GSO’s head Nguyen Bich Lam, the economy has been strongly recovering. It shows in the difference in growth rates of 1.18 per cent between the third and second quarters, and 1.13 per cent between the second and first quarters. These differences are the biggest between the quarters of a year since 2010.

In this year’s first nine months, 17 out of the economy’s 21 key economic sectors, excluding the mineral sector, witnessed increases.

For example, the nine-month industrial index for production (IIP) rose by 7.9 per cent year-on-year, higher than the 7.1 per cent increase seen last year. IIP in September was 13.2 per cent higher year-on-year.

The processing and manufacturing sector, which contributes up to 80 per cent of the industrial sector’s growth, expanded by 12.8 per cent, compared to 11.7 per cent in the same period last year. It was “also the highest ascension of this sector over the past many years, responsible for 9 per cent of the economy’s nine-month growth,” according to GSO.

“Despite the drop in mining and oil output, Vietnam’s economy continues to perform well, driven by its twin engines of export-oriented manufacturing and rising domestic consumption,” said Eric Sidgwick, ADB country director for Vietnam.

In this year’s first nine months, the mineral sector shrunk 8.1 per cent year-on-year, compared to 7.1 per cent in last year’s corresponding period, and caused a 0.57 per cent decrease in the economy’s nine-month growth.

According to a GSO survey on manufacturing and processing firms in Vietnam released last week, 41.5 per cent of respondents reported that their business was better in the third quarter than in the previous quarters. 52.6 per cent expected even better business in the last quarter, with 54.2 per cent forecasting an increase in production.

ADB last week set its new forecast for Vietnam’s economic growth in 2017 at 6.3 per cent, followed by growth of 6.5 per cent in 2018. “I think the 6.3 per cent is rather high, compared to many other Southeast Asian nations,” ADB’s Batten said.

Under ADB’s Development Outlook Update 2017 released last week, the growth rate of many nations in the region is expected to be lower than that of Vietnam this year and in 2018. Examples include Indonesia (5.1 and 5.3 per cent, respectively), Malaysia (5.4 and 5.4 per cent), Singapore (2.7 and 2.7 per cent), and Thailand (3.5 and 3.6 per cent).

“Vietnam has firmly established itself as a premier destination for foreign investment. It has a very large domestic market, a middle class that is growing quickly, a good labour force and an improved regulatory system. Enterprises are showing optimism about Vietnam’s prospects,” Batten said. “If the mineral sector had grown like in previous years, Vietnam’s economy could have grown by 7 per cent this year.”

VIR