Recently-released research forecasts outcomes in several indicators.
ANZ has revised its GDP growth forecast for Vietnam in 2015 and 2016 upwards, to 6.5 per cent for both years from the previous 6.2 and 6.4 per cent, respectively, in its research entitled Domestic Demand Returns in Vietnam.
Four reasons behind its forecasts are the faster expansion of industrial production since 2012, the production of construction-related materials picking up, a rapid rise in average real growth in retail sales in the first two months year-on-year, and the growth in sales of all types of motor vehicles.
Hence, ANZ downwardly revised its inflation forecast for Vietnam in 2015 and 2016, to 2.6 and 3.8 per cent, respectively, from 3 per cent and 4.5 per cent previously. With a subdued inflation outlook, ANZ's research said there would be sufficient room for the State Bank of Vietnam to further loosen monetary conditions this year.
The research also pointed out positive indices for the recovery of domestic demand. It said that 2015 industrial production would see the fastest annual gains since 2012. For example, manufacturing activity has been gaining momentum since October 2014, and the production of electronic components was 40 per cent higher than in the same period previously.
Though domestic investment is said to be slowly gaining traction, both the construction sector and the production of construction materials such as clay, cement and concrete are predicted to improve. ANZ even forecast that, based on GDP data, the construction sector was estimated to have grown 8.8 per cent year-on-year in Q4 2014, taking 2014 growth to 6.3 per cent, the highest since 2011.
Retail sales are also showing signs of improvement. Sales of motor vehicles are forecast to continue to rise for more than one year more. The ANZ-Roy Morgan Consumer Index in February was at 142.4, higher than the 2014 average of 133.3.
ANZ said that February's inflation was the lowest since the end of 2001 and monthly inflation has been contracting for four straight months, with lower oil prices easing 2015 inflation in Vietnam.
External demand is expected to see strong growth but the trade surplus may narrow in 2015, according to the research. Even so, ANZ affirmed that Vietnam remains a magnet for foreign direct investment (FDI). Newly-registered FDI stands at $721 million year-to-date, of which $600 million went to the manufacturing sector, with continued flows to the sector forecast to improve domestic productivity in the long run.