Domestic Consumption: The long holiday during the end of April/beginning of May should drive higher growth for May’s retail sales. 4M nominal retail sales of goods and services increased 9.6% YoY (better than 8.8% YoY recorded in 4M 2016). However, real retail sales increased only 6.7% YoY vs 7.8%YoY in 4M 2016 due to higher inflation seen this year.
Vietnam exports are enjoying substantial advantages thanks to the 11 bilateral and multilateral Free Trade Agreements (FTAs) Vietnam has signed and the ASEAN Economic Community (AEC) it joined in 2015.
GDP Growth: We maintain our forecast for 6.5% 2017 GDP growth despite a disappointing Q1. Vietnam’s economic growth was estimated at 5.1% YoY in Q1 2017, the lowest level in three years. A reduction of crude oil output and a slowdown in manufacturing growth, mainly caused by Samsung’s 38% YoY production contraction, were the main reasons for this disappointing result.
Domestic consumption: Though retail sales rose only 5.6% YoY in 2M 2017, the lowest rate in four years, strong consumer confidence, which accelerated to rank fifth in the world, should underpin domestic demand growth. Industrial production: IIP will continue to recover in March, supported by strong PMI of Vietnam and neighbors. The index of industrial production (IIP) rose 15.2% YoY in February, mainly driven by the manufacturing sector’s strong growth of 22.4% YoY.
Domestic consumption: We expect real retail sales to grow by 6.5%-7% YoY in February, supported by softening inflation. High inflation in January 2017 lowered real retail sales growth to 6.7% YoY, the lowest level over the last three years.
GDP: We expect 6.5% GDP growth in 2017. The recovery of agriculture and global oil prices, together with the resilience of export-oriented manufacturing and consumption, will be the key drivers for economic growth this year.
In a widely anticipated move, the US Federal Reserve Bank (the Fed) increased its benchmark Fed Funds rate by 25 basis points (0.25%) on December 15. In a less anticipated move, it announced plans for three more hikes likely in 2017. The dong, which has declined 1.8% since the US election on November 8, declined 0.15% for the day. We see continuing pressure on the dong through the end of 2016, but with devaluation not exceeding 2% for the year.
Domestic consumption: Although real growth slowed in 11M 2016 YoY due to higher inflation, it was still higher than the same period of the four years prior to 2015. As 2017’s Lunar New Year comes in mid-January 2017, December should see strong growth of retail sales, leading to an improvement in the annual rate.
Recently, Vietnam’s foreign exchange market has experienced its strongest turbulence since the beginning of this year. The USD/VND exchange rate has maintained a steady uptrend over the last two weeks. The central bank’s reference rate on November 24 was set at VND22,131/USD, up VND13 after slightly falling to VND22,118/USD on November 23.
Domestic consumption: Real retail sales growth was 7.4% YoY, a slowdown from 9M 2016. Vietnam’s consumer confidence index of 107 in Q3 2016, unchanged from Q2 2016, indicated promising future consumption.