FDI helps fuel 2018 forecasts

FDI helps fuel 2018 forecasts

Following nine months of good performance, the Vietnamese economy is forecast to continue on an uptrend, with higher-than-expected growth this year, significantly driven by strong foreign direct investment fuelled by sturdy domestic reforms in favour of the business community.

These days, authorities of the north-eastern province of Quang Ninh are working with South Korea’s Ly Viet Company on the company’s giant project worth at least $3-4 billion to build a specialised park in the province’s Uong Bi town on a 100-hectare land site.

“The investor is likely preparing the necessary dossiers. They have visited a number of localities in Vietnam to find a location for this project, and they may select Quang Ninh,” said Nguyen Duc Tiep, director of the Investment Promotion Division under the Quang Ninh Investment Promotion Agency.

In another case, Tiep told VIR, South Korean toy producer Teddy Bear is working with the province to pour hundreds of millions of US dollars into building a specialised museum on an area of two hectares in Halong city. “The investors told us that improvements in the local business and investment climate have attracted them to Vietnam,” said Tiep. “Over the past two years, the Vietnamese business and investment climate has improved remarkably, helping not only Quang Ninh, but also the whole country to lure in a great deal of foreign direct investment (FDI).”

According to the Ministry of Planning and Investment (MPI), FDI will continue being a key driver of Vietnam’s economic growth this year, with an estimated disbursement of $18 billion, up 2.8 per cent on-year. In the first nine months of this year, the disbursed sum was $13.25 billion, up 6 per cent on-year.

“A rise in FDI reflects that Vietnam’s business and investment climate continue improving, significantly contributing to a growth rate of 6.7-6.8 per cent this year,” said Minister of Planning and Investment Nguyen Chi Dung. “International organisations are also quite upbeat about Vietnam’s economic prospects.”

Standard Chartered Bank more than one week ago released its global research report on Vietnam entitled “Vietnam – Fast, not Furious, Growth,” in which the bank “continues to expect robust GDP growth of 7 per cent for 2018 and 6.9 per cent for 2019, driven by strong FDI-supported electronics manufacturing and rising consumption.”

Between January and September, Vietnam earned $36.1 billion (up 14.6 per cent on-year) from exporting mobile phones and spare parts, and $26.1 billion (up 16.7 per cent on-year) from exporting computers, laptops, and spare parts. The biggest exporters include Samsung, LG, and Intel.

“Vietnam is likely to remain the fastest-growing ASEAN economy in 2018 and 2019, as it was in 2017. We remain positive on Vietnam’s medium-term growth on strong manufacturing activity, as FDI inflows to electronics manufacturing remain strong,” said Chidu Narayanan, economist for Asia of Standard Chartered Bank. “We maintain our view that newly-registered FDI inflows will remain strong in 2018 and 2019-2020, at close to $17 billion each year.”

The World Bank has also just released its East Asia and Pacific (EAP) economic update, which stated that Vietnam’s medium-term outlook has improved further. Real GDP is projected to expand by 6.8 per cent in 2018 (up from 6.5 per cent in the bank’s April projection) before moderating to 6.6 per cent in 2019 and 6.5 per cent in 2020 due to the envisaged cyclical moderation of global demand. In the update, Vietnam’s economic growth is expected to outperform almost all EAP economies (see chart), propelled by the sustained global recovery and continued domestic reforms.

“Robust economic performance is underpinned by a government commitment to macroeconomic stability and private sector-led growth. Economic policies continue to focus on market-oriented reforms to reduce the economic role of the state, boost business conditions, and open the economy for more private investment,” said the update.

According to the US-based Trading Economics which provides economic indicators for 196 nations, GDP in Vietnam is expected to be $242 billion by the end of this quarter. In the long-term, the GDP is projected to stand at around $269 billion in 2020.

Meanwhile, Spain-based FocusEconomics, which provides in-depth economic analysis globally, expect the Vietnamese economy to expand by 6.7 per cent in 2018 and 6.6 per cent in 2019.

“This year’s strong growth is expected to carry into next year, thanks to robust FDI inflows and solid domestic demand. Strong private credit growth and rising incomes should support private consumption, while overseas capital should continue to buoy manufacturing output,” said the firm in a bulletin.

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