GDP: Q1 GDP grew 7.83%, the highest Q1 level in a decade. The impressive growth was attributed partly to a low base in Q1 2017. Results were upbeat in all three sectors of the economy. The pace of growth of the agriculture/forestry/fishery and industry/construction sectors doubled from the same period last year (4.05% vs 2.03% and 9.7% vs 4.17%, respectively). Meanwhile, the service sector maintained high growth of 6.7%. Based on these results, we raise our 2018 forecast to 7.0% GDP growth.
Manufacturing: Industrial Production stayed solid. Overall IIP for the first two months of 2018 increased 15.2% YoY vs 2.4% recorded in the same period last year, mainly thanks to the IIP of the manufacturing sector, which surged 17.7%, contributing 13.2 percentage points to overall IIP. The PMI survey’s results showed manufacturers continue to remain optimistic regarding client demand. This should help to maintain the current upbeat IIP in the following months.
The potential for more Fed rate hikes than previously anticipated due to rising inflation worries have recently been raising concerns over a stronger dollar and capital outflows from developing markets. However, over the past year, a weak dollar has been more widely mentioned in conjunction with the ongoing expansion of the global economy. Moreover, a weak dollar may be more aligned with US President Trump’s protectionist policies as it is expected to boost US exports and expand production.
Manufacturing: Production continues expansion ahead of Tet holiday. January’s IIP surged 20.9% YoY vs a marginal rise of 0.7% seen last January, driven by solid manufacturing and a recovery of the mining sector. However, the timing of this year’s Tet holiday distorts this figure somewhat. We await February data to get a clearer reading on January. Meanwhile, Vietnam's manufacturing PMI hit a nine-month high of 53.4, beating that of regional peers.
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.