Latest World Bank report has Vietnam better placed than most to see healthy growth over next few years.
The World Bank’s January 2016 Global Economic Prospects report, released on January 6, puts Vietnam among emerging countries in the world with the strongest growth prospects.
Overall, growth in the East Asia and Pacific (EAP) region slowed to an estimated 6.4 per cent in 2015, down from 6.8 per cent in 2014. “While decelerating growth in China and a weaker-than-expected recovery in Thailand accounted for much of the decline and the weak growth in commodity exporting economies (Indonesia, Malaysia) was expected, Vietnam surprised with a stronger than expected performance,” the report stated.
GDP growth in the country in 2015 has been estimated at 6.68 per cent by the General Statistics Office (GSO); its highest for the last five years.
Export growth slowed across the region (Cambodia and Vietnam were exceptions) as global trade contracted, the report went on. FDI inflows remained buoyant and were mostly directed at labor-intensive manufacturing.
Vietnam, in particular, appears to benefit from China’s rebalancing, the WB explained. Factors include its competitive and diversified export base and China’s move from low-skill, labor-intensive exports toward more sophisticated products. Appreciation of the Chinese Yuan has accelerated the shift of labor-intensive production from China to lower-income countries, including Cambodia and Vietnam.
Among the large, developing ASEAN economies, growth in the Philippines and Vietnam will benefit from rising household incomes caused by low commodity prices, a diversified and competitive export base (Vietnam), and investment driven by robust FDI flows, according to the report.
The TPP could provide new impetus to trade and lift activity by helping to reduce tariffs and other trade barriers. By 2030 the TPP could lift member country GDP by an average of 1.1 per cent, with much larger benefits in countries with existing high trade barriers like Vietnam and Malaysia.
Vietnam is also among the countries with the strongest growth prospects, forecast at an average of 6.3 per cent in the 2016-2018 period in the report.
Contributing to the gains are rapid investment growth buoyed by robust confidence and FDI, consumption growth fueled by solid labor markets, and export growth as Chinese FDI projects in export industries come onstream.
East Asia and Pacific country forecasts
(Real GDP growth at market prices in percent, unless indicated otherwise)
Global economic growth was less than expected in 2015, according to the report, when falling commodity prices, flagging trade and capital flows, and episodes of financial volatility sapped economic activity. Firmer growth ahead will depend on continued momentum in high-income countries, the stabilization of commodity prices, and China’s gradual transition towards a more consumption and services-based growth model.