Vietnam growth to slow down to 6.8 pct: Fitch Solutions

"Transport and logistical infrastructure and human capital bottlenecks will continue to weigh on growth of the manufacturing sector, which accounts for around 16.5 percent of the Vietnamese economy," research firm Fitch Solution said in a report.

Vietnam is a major beneficiary of the US-China trade war, which accelerated the structural shift in low-end electronics and textiles manufacturing out of China and into Southeast Asia, the report said.

But the rush to set up operations and exports out of Vietnam has put considerable stress on the existing road and port infrastructure, resulting in severe traffic congestion in and around major cities such as Ho Chi Minh City and Hanoi, and also week-long delays at ports, it said.

Growth in the manufacturing sector slumped in the final quarter of 2019 to 7.3 percent from 10.4 percent in the third quarter.

Export growth also decelerated after September, plunging from 10.68 percent to 4.66 percent in November, and Fitch expects the trend to persist.

A shortage of skilled labor would also weigh on manufacturing by inhibiting the integration of better technology into work processes, the report said.

Agriculture, which accounts for 14 percent of GDP, is also under pressure due to epidemics such as the African swine fever.

The African swine fever outbreak has affected all 63 provinces and cities in the country and reduced the country’s pig herd by 25.5 percent, and Fitch said the spread of the disease across Asia inhibits Vietnamese farmers’ ability to rebuild their herds.

But stronger growth in construction (5.9 percent of GDP) and services (41.6 percent of GDP) is expected to partially offset the slowdown.

Vietnam’s GDP growth reached 7.02 percent last year.