VN to be Asia's second fastest growing economy

Wednesday, Jan 27, 2016 21:25

Viet Nam's economic growth may accelerate to 6.9 per cent this year through better construction activity and manufacturing strength. -- Photo

HCM CITY (Biz Hub) — Standard Chartered Bank expects Viet Nam's gross domestic growth (GDP) to accelerate to 6.9 per cent, higher than the 6.6 per cent forecast, through better construction activity and manufacturing strength.

This forecast, which will make Viet Nam the second fastest-growing economy in Asia, second only to India, was highlighted in the bank's global research briefing in HCM City today.

The global research report, titled "Retreat, Regroup, Rebound" and published recently, updated that Viet Nam is moving onwards and upwards, although global growth is likely to remain flat at 2.9 per cent in 2016.

"Despite the slow pace of growth, we expect confidence and sentiment – the two main culprits of 2015's retreat in emerging markets – to improve. China's slowdown and Fed rate-hike expectations should become less of a concern as we move into 2016," the bank's chief economist, Marios Maratheftis said.

"We believe Viet Nam is an attractive destination for investment, a view echoed by our clients, and expect strong foreign direct investment (FDI) inflows in 2016 as well," Nirukt Sapru, chief executive officer of Standard Chartered Bank Viet Nam said.

"We believe the country is one of the few prime investment opportunities in an otherwise lacklustre global economy," he said, adding that the central bank's recent decision to set a daily reference rate for the Vietnamese dong will allow it greater flexibility to respond to increasingly volatile market conditions.

Standard Chartered bank's economists noted that the domestic economy was robust in 2015, recording a faster-than-expected growth of 6.7 per cent. This beat expectations of 6.6 per cent and was the fastest pace of growth since GDP was rebased in 2013.

The report pointed out that consumption is likely to remain the biggest growth driver in 2016, closely followed by investment. The bank forecast that the contribution from investment to growth will be stronger than in 2015 as implemented FDI continues to increase this year.

The study also forecast inflation to be low this year at 1.4 per cent year-on-year, while net exports are likely to remain flat in 2016.

The bank said today's event was part of its global briefing series, which point out socio-economic trends that will have impact on international business and trade in the year ahead.

The Ministry of Planning and Investment's Foreign Investment Agency told the press recently that capital from regional neighbours, such as Thailand and South Korea, into Viet Nam was increasing.

Economists said China's economic slowdown and the US Federal Reserve increasing interest rates were driving investor withdrawals from emerging markets.

They said Viet Nam should further improve its business environment and enhance labour productivity to take advantage of current capital flow tendencies, especially when FDI in the country reached a record high of roughly $23 billion last year. — VNS

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