Vietnam will excel in GDP growth in ASEAN

A report by the Institute of Chartered Accountants in England and Wales (ICAEW) forecasts Vietnam's GDP growth to reach 6.5% in 2016 and will increase to 7% in 2017.

According to the report “Economic Focus: Southeast Asia Q3” recently published by ICAEW in collaboration with Oxford Economics, Vietnam is expected to outperform the ASEAN region in GDP growth.

Although Vietnam's economic growth was somewhat hampered in the first half of the year by limited oil revenues and drought affecting agricultural production, industrial production continued to grow strongly, foreign direct investment (FDI) continued to flow into Vietnam, and the signing and implementation of new free trade agreements were important factors in Vietnam's GDP growth reaching 6.5% in 2016 and increasing to 7% in 2017.

Meanwhile, regarding the development of ASEAN countries, the report stated that in recent years, ASEAN economies have significantly widened the economic development gap compared to the Middle East, Africa, and Latin America.

This resilience is due to ASEAN economies having a lower commodity-weighted share than those in the Middle East, Africa or Latin America, and thus being less affected by falling global commodity prices.

Moreover, in recent years, the region has become increasingly competitive globally, with low-cost Vietnamese firms competing effectively with Chinese firms in low-end manufacturing.

The Deloitte Global Manufacturing Competitiveness Index 2016 report shows that Thailand, Vietnam, Indonesia and Malaysia are currently among the 20 most competitive manufacturing economies in the world, and are poised to continue to rise. These successes are a prerequisite for promoting trade as well as creating jobs, attracting investment and increasing consumer spending.

In particular, the reason for the above development is that the public debt ratio of many ASEAN economies has remained stable, so the governments of these countries have more room to support demand due to the decrease in world growth.

However, in the sustainable growth of the ASEAN bloc as a whole, the report said that investment growth in Indonesia and Malaysia will increase from 2017, but in Vietnam it will cool down a bit.

To finance investment, the report said businesses will need a source of capital at a reasonable cost to ensure investment projects are financially viable. But with inflation in countries in the region expected to increase slightly, policymakers will begin to raise interest rates, increasing the cost of borrowing and reducing investment.

Furthermore, on the capital issue, the ICAEW report raised concerns about Vietnam's credit growth rate returning over the past year.

The reason is the lack of “security” of collateral and the surge in consumer credit. These are the two main factors behind the lending activities that affect the real value of the economy and financial viability.

However, despite such concerns, the report still believes that the economies of ASEAN countries, including Vietnam, will remain stable in the coming months.

According to Cafebiz.vn/ Customs Newspaper