Viet Nam’s expansion has charged ahead despite the recent financial and trade turmoil, which has affected many emerging Southeast Asian markets, Moody’s Investors Service has said.

In a report titled ‘Viet Nam outlook: Resiliency amid emerging market uncertainty’ released recently, Moody’s forecasts that Viet Nam’s GDP growth would maintain an expansion of 6.7 per cent this year, following 6.8 per cent real GDP growth in 2017.

According to the report, the positive economic outlook is supported by burgeoning electronic and textile exports, a modest recovery in agriculture, and steady inflows of foreign investment.

Additionally – unlike in years past – a strong domestic market will further support headline growth, it said, adding that with tourism traffic at a record high in the first nine months of this year and a healthy labour market, consumer sales have been rising at a double-digit clip since last year.

Trade remains the primary driver for continued expansion within Viet Nam, it said, providing analysis that Viet Nam’s low cost of labour and comparatively young and growing population make it an attractive locale for manufacturers.

As a result, the improved trade balance increased Viet Nam’s current account surplus to an estimated 6.6 per cent of GDP in the second quarter of 2018 from 5.1 per cent of GDP in 2017.

Driven in part by trade tensions, multinational companies – including LG and Samsung – have been shifting some production from China to other areas, including Viet Nam, the report noted.

However, global trade frictions and a strengthening US dollar have hurt Viet Nam’s financial market this year, although less so than other emerging markets.

Moody’s said Viet Nam’s current account surplus and large foreign reserves will continue to position the economy better than other emerging markets facing widening current account deficits.

The rating agency said it expects the State Bank of Viet Nam (SBV) to maintain a neutral stance through the end of the year, deviating from a handful of other central banks in Asia.

SBV is largely content with how economic conditions are playing out this year, and wants to maintain an environment that supports foreign investment into the country, it noted.

According to Moody’s, sound macroeconomic policy and further structural reforms are vital for continued growth in the medium and long term, and policymakers are working on stabilising the Government’s debt load, as Viet Nam’s public debt rose to an estimated 63.7 per cent of GDP in 2017. — VNS