VietNamNet Bridge – The Vietnamese economic slowdown is bottoming out but a return to trend growth is not soon to come, according to a research report by Standard Chartered Bank.

Inflation has slid to 6% per year after surging to 20% in 2011, says the report, adding export performance retuned to a double-digit growth rate in January-October while Government efforts to cope with bad debt in the banking system and restructure the economy have begun paying off.

The report highlights an improvement in gross domestic product growth in the third quarter, which is put at 5.54%, up from the 4.9% achieved in the first half of the year. These are signs that the slowdown is bottoming out.  

The country’s economic recovery is buoyed by foreign direct investments, says the report. Foreign direct investors are still interested in the local economy despite economic restructuring challenges.

The report says a survey of Standard Chartered’s customers having factories in China indicates they are considering moving to other destinations in the Mekong region, including Vietnam, due to rising labor and factory operating costs in China.

Standard Chartered said Vietnam last year made substantial headway in terms of macroeconomic stability. The Government sought to solve problems with the banking system, thus making the financial services market stable.

However, a lot more remains to be done regarding the banking sector, state-owned enterprises and real estate.

While growth is improving, structural issues would prevent the country from ensuring growth sustainability, according to the report.

The report shows concerns about poor logistics and infrastructure in the Mekong countries. Vietnam is doing better than other neighboring nations thanks to stable power supply and well-developed ports such as those in HCMC and Danang but logistic services remain an issue to be solved.

The lackluster real estate market is bottoming out and has shown signs of picking up again. The report cites property management services and consulting firm CBRE as saying that successful transactions in HCMC in the first nine months of the year doubled versus a year ago.

The VND30-trillion housing credit support program of the Government will benefit property developers as homebuyers can borrow cheap loans. The real estate market might get a new incentive as the Government is weighing the possibility of allowing foreign individuals to buy homes in the country.

A full recovery of the real estate market will take time but this market’s stability is key to macroeconomic and banking sector stability, notes the report.    

Source: SGT