The growth will continue to be broad-based, underpinned by robust private consumption, the continued expansion of manufacturing, services, and agriculture, according to Asian Development Bank's flagship annual economic publication “Asian Development Outlook 2019” released today.
The bank (ADB) claims that the economy be propelled by greater market access for Vietnam’s exports through various free trade agreements, including the recently ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
“Vietnam’s ratification of CPTPP in 2018, and its expected free trade agreement with the European Union, may stimulate investment in the near term as foreign enterprises explore the expanding business opportunities that Vietnam offers,” the report stated.
ADB country director for Vietnam Eric Sidgwick said: “Economic growth will likely hold up well in the near term, supported by export-oriented manufacturing, foreign direct investment, and sustained domestic demand.”
“The growth momentum is expected to continue, thanks to ongoing reforms to improve the business environment and encourage private investment,” he added.
Inflation is expected to continue to average 3.5 per cent in 2019 but accelerate to 3.8 per cent in 2020.
The announcement that the US Federal Reserve will no longer raise its policy rate in 2019 is likely to relieve pressure on the Viet Nam dong and inflation, as will lower international oil prices.
Upward adjustments to administered fees for public education, health care, and electricity may add to inflationary pressures, however, as may a higher minimum wage.
Vietnam’s economy still faces risks although the economic performance in reached a sweet spot in 2018. The world’s major economies - Vietnam’s key trading partners are weakening while Vietnam is one of the most trade-dependent countries in the region, with trade volume reaching twice the size of its gross domestic product.
Domestically, lackluster progress in state-owned enterprises reform could be a drag on growth.
The report underlines the importance for Vietnam to strengthen private firms’ integration in the global value chains, which is a key policy challenge for Vietnam’s long-term growth.