Report notes positive and negatives in the country's economy.
ANZ expects to see Vietnam record 6.9 per cent growth in 2016 and 6.5 per cent in 2017 even though the country has suffered downsides from a contraction in agricultural output while global expectations for the rice output are not promising, both of which weigh on agricultural exports.
It previously forecast GDP to come in at 6.7 per cent this year and 6.5 per cent next year.
GDP growth of 5.6 per cent year-on-year in the first quarter missed forecasts by a wide margin (of 6.1 per cent from the market and from 6.2 per cent ANZ). Agricultural output contracted by 1.2 per cent year-on-year due to the early onset of cold weather in northern Vietnam, which damaged crops in the region, and also the arrival of El Niño weather pattern, which badly affected harvests in the Mekong Delta. Meanwhile, industrial expansion of 6.2 per cent year-on-year was lower than the 9.0 per cent rise in the same period of 2015 and construction and services, though growing stronger than in the first quarter of 2015 failed to offset agricultural contraction.
Credit growth rose to 19.0 per cent year-on-year in November as banks’ risk appetite improved. The recovery in the real estate sector was supported by loans to the construction sector.
Assuming the State Bank of Vietnam allows sufficient flexibility in the USD/VND exchange rate, interest rates may rise as VND liquidity will likely remain adequate. However, so long as the central bank keeps a cap on deposit rates in the hope of discouraging inefficient use of capital the room to raise policy rates in limited.
Foreign direct investment (FDI) got off to a good start in 2016 with a year-to-date figure of $2.74 billion in the first quarter, up from $1.217 billion in the same period last year.
The trade balance was in surplus by $776 million as import growth contracted on the back of unfavorable base effects. ANZ expects for-export production to be boosted in 2016 as last year’s investment in the manufacturing sector bears fruit.