GDP: Strong gains in industry & construction, rising consumption and a rebound in agriculture powered GDP growth past the Government’s target to 6.8%. We expect 6.7% GDP growth in 2018 as rising global consumption fuels demand for Vietnam’s exports.
Domestic consumption: Real retail sales growth hit a seven-year high of 9.5% YoY in 11M 2017. As the APEC Summit ends, Christmas comes around as another boost to retailers, who will start sales promotions and prepare to meet rising consumer demand ahead of the end-of-the-year holidays. This should help retail sales enjoy robust growth in the last month of the year.
US President Donald Trump completed his Asian trip, the longest trip ever of an American President in Asia, visiting Japan, the Republic of Korea, China, Vietnam and the Philippines. Upon returning home, Trump declared his trip as a tremendous success and that “America is back”.
Privatization and divestment of State-owned enterprises (SOEs) is a key part of the Government’s strategy to maintain public debt within regulatory limits. Despite a well-controlled budget deficit (3.42% of GDP) and public debt (62.6% of GDP) under the Government’s target in 2017, there remain some concerns about debt-to-GDP surpassing the limit of 65%, especially in terms of infrastructure development and social welfare.
Domestic consumption: Real retail sales growth in 10M 2017 reached a seven-year high of 9.4% YoY. Retail sales of goods and services are expected to stay healthy in the coming months following a series of APEC meetings in November, which should partly help to boost the growth of accommodation & catering and tourism services, while the coming Christmas and New Year holidays continue to bolster consumption.
The White House has officially announced US President Donald Trump’s trip to Asia in November, including the APEC summit in Da Nang and a meeting with Vietnamese President Tran Dai Quang in Hanoi. It is therefore timely to review the US administration’s policies toward Vietnam, including trade and investment relations as well as the prospects for a bilateral FTA between the US and Vietnam. Globally, the Trump administration's trade policies have caused concern for US trade partners.
GDP growth: Given impressive GDP growth in Q3 2017, we believe the Government’s target of 6.7% for FY2017 is achievable. The Vietnamese economy continued to expand impressively at 7.46% YoY in Q3 2017 following a strong bounce of 6.28% YoY in Q2 2017. In 9M 2017, GDP increased 6.41% YoY.
Despite rising global uncertainties, domestic macro development continues to strengthen Vietnam’s economic outlook. Vietnam’s consumer confidence index (CCI) recorded the highest score (117) in five years and ranked as the fifth most optimistic country globally. Vietnam’s exports grew strongly at 19.3% YoY in 8M 2017, which brought the actual trade deficit down to USD860 million, from the previous estimate of USD2.13 billion by the GSO.
The State Bank of Vietnam (SBV) uses the value of the VND as an important tool of monetary policy. It carefully balances the need to support exports against inflationary pressures created by a weaker dong. It has set currency stability as one of its main economic goals.
Domestic Consumption: Retail sales should remain strong through year-end. Real retail sales grew 8.7% YoY in 7M 2017, the strongest pace during that period since 2010, while retail sales of goods and services increased by 10% YoY.