Institute of Chartered Accountants in England and Wales’ recent Economic Insight: South East Asia report projected Vietnam’s economy to grow at the fastest rate among the Southeast Asian nations. The report revealed the growth of around 6.7 percent this year.
Vietnam, a country situated on the South China Sea, separated itself from other Southeast Asian countries. Most countries from this region have suffered a decline in exports in the second quarter of 2019. Vietnam’s economy grew at 6.8 percent year-on-year in the first quarter. The strong growth is due to strong manufacturing, steady services, and higher agricultural output.
But the reduced Chinese demand for goods and rising trade protectionism will cause its economic momentum to trend lower. Although some countries, like Vietnam, may get some positive results from the US-China trade war because of trade diversion, Vietnam still relies on its exports to China.
Foreign Direct Investment
The report added that foreign direct investment (FDI) and manufacturing would continue to stimulate Vietnam’s economy. The country’s FDI in the first two months of 2019 grew by 9.8 percent to around $2.6 billion year-on-year.
Foreign investors are most interested in Vietnam’s manufacturing. Thanks to favorable labor conditions and improving infrastructure, foreign investment in Vietnam continues to boom.
Moreover, the report showed that domestic demand will remain strong in 2019-2020. Tourism will also thrive, the report added.
ICAEW’s regional director, Greater China, and South East Asia, Mark Billington, said that Vietnam would grow despite the trade war between the U.S. and China and other external factors that affect the country’s export growth. However, Vietnam still has to take the necessary actions to keep FDI inflows stable.
In addition, the report revealed that it expects the Southeast Asian to grow 4.8 percent this year, slower than the last year’s 5.3 percent.
Also read: How Did Vietnam Escape All 3 Recessions?