Latest ANZ reports paints a positive picture overall of the state of Vietnam's economy.
Vietnam’s domestic economy continues to gather steam and domestic consumption has turned a corner and will support economic recovery in 2015 and 2016, according to the latest report from ANZ, entitled Greater Mekong Outlook: The Comparative Advantage of the Mekong, released on June 13.
The report indicated that domestic demand is gaining traction The ANZ-Roy Morgan Vietnam Consumer Confidence index held steady at 140.2 in May, above the 2014 average of 133.3. As at April, auto sales this year had increased 64 per cent, up from 28.3 per cent in the same period of 2014. Real retail sales had risen 8.45 per cent as at May, compared to 5.8 per cent by May 2014.
With these optimistic figures the steady improvement in domestic consumption will underpin economic recovery in 2015 and 2016, the report stated.
ANZ also noted that Vietnam has been running a narrow trade deficit at the start of this year, of $2.97 billion as at May. Imports rose 16 per cent year-to-date (ytd) year-on-year (y-o-y), outstripping export growth of 7.5 per cent ytd y-o-y, of which machinery and electronic products led the way in imports.
In May the State Bank of Vietnam delivered its second VND devaluation for 2015, which was earlier than expected. However, the narrow trade deficit in the first half of the year put upside pressure on the USD/VND rate. “We forecast the VND to end the year at 22,050/USD,” the report said. “Following the devaluation, interbank rates (which were elevated) pulled back, aided by liquidity injections from the central bank.”
Lower inflation was forecast, of 1.7 per cent in 2015 and 3.5 per cent in 2016 (from 2 per cent and 3.9 per cent, respectively), and ANZ indicated that inflation remained soft, often undershooting expectations. The base effects from low oil prices remain a drag on the headline figure. Soft food price gains are detracting from the steady improvement in the non-food/fuel items in the CPI basket.