The bank cautioned that the ongoing trade tension between the US and China could have a spill-over impact on Vietnam.

Singapore-based United Overseas Bank (UOB) has revised up its GDP growth forecast for Vietnam to 6.9% in 2018 from the previous 6.8%, higher than the Vietnamese government’s target of 6.7%, citing the robust rate of economic growth in the first three quarters. 

“High transport and energy infrastructure investments remain key growth drivers. Industrial production will be boosted by continued opening of new multinational enterprises in labor-intensive, export-oriented manufacturing and processing industries,” the bank said in a note sent to Hanoitimes.

In line with market consensus, Vietnam’s economy expanded 6.9% in the third quarter and 7.0% in the first three quarters of this year. The country’s GDP in the nine months through September was mainly driven by industry, construction and services, particularly wholesale and retail, transport, banking and finance, education and healthcare.

For the first three quarters of 2018, industry and construction expanded 8.9% and services rose 6.89%. These are slightly lower than the previous growth rates of 9.1% and 6.9%, respectively. Manufacturing maintained solid growth at 12.7%, which is lower than the 13.0% growth in the same period last year. Moreover, agriculture grew 3.7% compared with 2.8% in the first three quarters of 2017.            

The bank cautioned that the ongoing trade tension between the US and China could have a spill-over impact on Vietnam. “Vietnam’s growth this year could be dented by weaker demand in key export markets such as the US, the EU and Japan, whilst unfavorable weather conditions could also undermine agricultural output and mining production.”

In terms of monetary policy, the State Bank of Vietnam is expected to keep refinancing rate unchanged at 6.25% until at least the end of this year. At the current benchmark rate, the monetary policy stance remains conducive to the continuation of economic expansion.

The strong growth eases pressure on the government and the central bank to add more stimuli in order to achieve annual growth target of 6.7% under the 2018 socio-economic development plan. As a result, another policy rate cut may not be on the cards at the SBV even as other Asian central banks have started to pursue monetary policy normalization by raising policy rates slowly, the bank said.

Hanoitimes