Viet Nam’s economic growth to remain high absent trade shocks

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“Aided by able macroeconomic management, economic growth will spurt in 2018, with Viet Nam becoming one of the strongest performers in the region”, said Mr. Eric Sidgwick, ADB Country Director for Viet Nam. “Viet Nam’s robust economic growth will be driven by vigorous manufacturing and export expansion, rising domestic consumption, strong investment fueled by FDI and domestic enterprises, and an improving agriculture sector,” he added.

Viet Nam is set to continue its strong economic performance, with GDP growth forecast to rise to 7.1% this yea

The Asian Development Outlook (ADO) 2018 forecasts inflation to reach 3.7% on average this year, up from 3.5% in 2017, before edging up to 4.0% in 2019, as domestic demand and global commodity prices rise.

Mr. Sidgwick noted: “A broad based increase in the government revenue effort in 2017, helped curtail the budget deficit and reduce total public debt to 61.3% of GDP by the end of 2017, from 63.6% a year earlier. This fiscal consolidation combined with moderate inflation should provide for continued macroeconomic stability.”

While highlighting Viet Nam’s strong growth potential, the report notes several major risks to the outlook including rising global trade protectionism.

Viet Nam’s annual trade now exceeds 185% of GDP, making it the second most trade dependent economy in South East Asia, behind Singapore. A major disruption in trade between two of Viet Nam’s largest trading partners, the United States and the People’s Republic of China, could have spillover effects on economic growth, the report noted.

The report also recommends greater efforts to address Viet Nam’s skills gap to ensure growth remains sustainable and equitable.

“Viet Nam has been able to mobilize an abundant supply of young, well educated, workers to attract foreign investment into labor-intensive manufacturing over the last decade,” said Mr. Sidgwick. “However, as the Vietnamese economy becomes more sophisticated a gap between worker qualifications and business needs has emerged and is widening. If not addressed, this skills gap could become a major obstacle to Viet Nam’s development aspirations”, he added.