Open for Business: Trade and Investment report notes promising results for many indicators.
“With all the turbulence in the world, Vietnam stands out with the more upbeat news and economic data,” according to the Open for Business: Trade and Investment report released on July 3 by HSBC Global Research.
Exports rose by 18 per cent in June, defying gravity, and taking the year-to-date growth close to 10 per cent, the report noted. The Purchasing Managers Index (PMI) was positive, expanding sharply in the second quarter.
Moreover, output will rise in the next months because in June the PMI fell, despite being positive overall in recent times, to 52.2 from 54.8 and the leading indicator - new orders minus inventories - rose sharply. Thanks to improving demand, credit growth also picked up, by 17 per cent year-on-year.
The biggest news in recent days was the passing of the Trade Promotion Authority (TPA) by the US Senate and subsequently President Obama, paving the way for more foreign investment to come to Vietnam to capitalize on the country’s labor cost comparative advantage and preferential tariff rates.
HSBC therefore predicted that the TPA will be positive for overall economic and labor productivity growth, as rural workers can simply improve their lot by working in factory jobs.
“Vietnam is starting at a low base and also has the lowest labor productivity per worker in ASEAN (defined as output per worker)”, HSBC noted. It has had the highest labor productivity growth in recent years simply through absorbing rural labor into simple manufacturing jobs, the report said.