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.
GDP growth: We forecast 6.4% 2017 GDP growth driven by a continuing recovery of agriculture, steady FDI growth and production and consumption demand. Measures to ease monetary policy and the Government’s strong determination to support GDP growth may help the economy expand 6.8% YoY in H2 2017.
Domestic Consumption: Stronger consumer demand during the summer holiday will promote higher retail sales growth in June. In 5M 2017, retail sales of goods and services rose 10.2% YoY, higher than 9.1% growth in the same period last year. But stronger inflation in the first five months lowered real retail sales growth to 7.4% YoY vs 7.8% in 5M 2016.
Balance of Payments (BOP) is one of the key facets that reveal the health of an economy. As a developing country, Vietnam encountered a structural BOP problem in the 2007-2011 period with the current account deficit and financial account surplus significantly expanding. A problematic BOP, together with a GDP growth slowdown, very high inflation and strong credit growth, reflected macroeconomic instability during this period.
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.