Vietnam's economy remains resilient amid weaker external environment

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In the Asian Development Outlook (ADO) 2019 Update, ADB noted that while Viet Nam’s gross domestic product growth moderated in the first half of 2019, it will remain resilient this year and next year despite a weaker external environment. Inflation forecasts are revised down to 3.0% from 3.5% for 2019 and 3.5% from 3.8% for 2020.

Trends in the first half of the year support ADO 2019 forecasts for moderate deceleration this year and next following exceptionally high growth in 2018. However, inflation is now projected to slow in 2019, and the projection for 2020 is also revised down. The current account surplus is now forecast to narrow in both years more than projected in April. Despite a slowdown in exports, the economy remains broadly healthy thanks to resilient domestic demand and sustained inflows of foreign direct investment.

“Despite a slowdown in export growth due to the escalation of the trade conflict between the United States (US) and the People’s Republic of China (PRC) and the consequent downturn in global trade, the economy remains healthy thanks to continued strength in domestic demand and sustained inflows of foreign direct investment,” said ADB Country Director for Viet Nam Mr. Eric Sidgwick. “Prospects for domestic consumption continues to be positive, supported by rising incomes, buoyant employment, and moderate inflation.”

The recent signing of a free trade agreement with the European Union promises to further open market access for trade and investment, as does the regional Comprehensive and Progressive Agreement for Trans-Pacific Partnership. A recent amendment to the Public Investment Law should improve public investment by accelerating processes, simplifying procedures, and enabling faster disbursement of public investment.

While retaining the growth outlook for Viet Nam for this year and the next, the report highlighted significant risks to the forecast. Further escalation of the US–PRC trade tension and continuing global economic slowdown could shrink global trade, which will adversely impact the country’s trade performance and economic growth.