Vietnam’s economy is expected to grow at a steady 6.9% in 2019, supported by FDI-driven manufacturing and stronger domestic activity, Standard Chartered Bank has said, highlighting the shift to sustainable growth.

Vietnam's export growth is forecast to remain robust at 10% while import growth will stay below 10%. Photo: HSBC

“Most macro-economic indicators improved in 2018, interest and FX rates were kept stable despite the Fed’s hike in interest rates and US-China tension, and non-performing loans (NPLs) were well-managed below 3%,” said Nirukt Sapru, CEO Vietnam and ASEAN and South Asia Cluster Markets, Standard Chartered Bank.

The performance has helped minimize market volatility, increase Vietnam’s export competitiveness relative to other ASEAN economies, attract FDI, and create public confidence towards the State Bank of Vietnam (SBV)’s management capabilities and policies, Sapru added. 

“We believe that the Vietnamese economy will remain one of the fastest growing in Asia and likely the fastest-growing ASEAN economy in 2019.”

The country’s export growth is forecast to remain robust at 10% while import growth will stay below 10%, keeping the trade balance in surplus. Inflation is predicted to average 4.0% year-on-year.  

Vietnam recorded a 10-year high GDP growth rate of 7.1% year-on-year in 2018. 2018 was the first year since the global financial crisis that Q2 growth was slower than Q1, and Q3 slower than Q2.

“We believe this is a sign of focus on sustainable growth over the medium term. We remain positive on Vietnam’s medium-term growth on strong manufacturing activity as FDI inflows to electronics manufacturing remain strong,” said Chidu Narayanan, economist for Asia at Standard Chartered Bank.

According to the latest macro-economic research report on Vietnam, the manufacturing sector has expanded by double digits for most of the past four years and this pace is likely to continue in 2019, the bank said.

Standard Chartered expects manufacturing growth to remain strong this year, though mildly lower than in 2018 due to the high base and uncertain external environment. Still-strong FDI inflows to manufacturing will likely support robust manufacturing output. 

FDI inflows are projected to stay strong in 2019 at close to US$15 billion, and FDI inflows to the manufacturing sector, particularly electronics manufacturing, will likely remain high in the medium term. 

Standard Chartered Bank anticipates that the SBV is likely to remain accommodative in the near term to support growth, even as inflation edges higher. 

It expects steady policy rates in 2019 and a mild appreciation of the Vietnamese dong, but sees a risk of policy tightening in the second half of 2019 as inflation rises.

Vietnam’s National Assembly targets the local economy to grow 6.6-6.8% in 2019. The World Bank in December 2018 forecast the growth to decelerate to 6.6% in 2019 and 6.5% in 2020.

Hanoitimes