2016 GDP growth forecast increased to 6.9% from 6.6% previously.
Vietnam’s GDP growth is expected to come in at 6.9 per cent in 2016, higher than the previous forecast of 6.6 per cent, driven by better construction and manufacturing activity and continued strength in foreign direct investment (FDI) inflows, according to the Global Research report from Standard Chartered Bank. If met, the forecast would see Vietnam become the second fastest-growing economy in Asia, after India.
“We believe Vietnam is still an attractive destination for investment, a view echoed by our clients, and expect strong FDI inflows in 2016 as well,” the report stated. “We believe the country is one of the few prime investment opportunities in an otherwise lackluster global economy.”
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.
Net exports, however, are likely to remain flat in 2016 with only a mildly positive contribution to growth in the first half, offset by a contraction at the end of the year. Electronics exports will likely continue to grow strongly, offsetting still-soft crude oil exports on low prices, which are likely to weigh on the fiscal balance.
FDI inflows are expected to increase in the second half of 2016. Disbursed FDI is likely to exceed 2015’s figure. Continued FDI inflows to high-end manufacturing should continue to support strong growth in electronics exports as more production lines start operation.
Manufacturing growth in the first half of 2016 is likely to be at its fastest since the global financial crisis, driving GDP growth. In the second half growth will likely be driven by construction. According to the report, manufacturing, which makes up 15 per cent of the economy, grew 10.6 per cent in 2015, picking up pace throughout the year and recording much faster growth than the 8.45 per cent recorded in 2014. Construction, which accounts for 6 per cent of the economy, was the other key driver, growing 10.8 per cent in 2015, following on from 7.1 per cent in 2014. The report expects growth to remain strong in 2016, supported by still-strong manufacturing growth and further construction activity.