Vietnam to have strongest growth in ASEAN region

By Tran Quoc Thoai   March 22, 2016 | 11:33 pm PT
The Southeast Asian country will continue to outperform its regional peers given its “robust manufacturing activity and strong foreign direct investment flows”, said U.S.-based credit rating agency Moody's in a recent announcement.

Vietnam is forecast to maintain strong economic growth through 2016 and 2017, the announcement from by Moody's Investors Service said on Tuesday.


Photo: VnExpress

Vietnam’s manufacturing sector saw a further modest improvement in business conditions as growth in output, new orders and employment was maintained, but it still saw a 1.2 point decrease in the Manufacturing Purchasing Managers’ Index (PMI) over January to 50.3, according to a Nikkei report released earlier this month.

In the first two months of this year, disbursed foreign direct investment (FDI) in Vietnam reached $1.5 billion, up 15.4 percent year on year, while new foreign investment pledges surged to $2.8 billion, up over 100 percent year on year, according to the Ministry of Investment and Planning.

Committed/added FDI in Vietnam last year was estimated at $22.76 billion, a 12.5 percent year-on-year rise, and disbursed FDI stood at $14.5 billion, rising 17.4 percent against the previous year, according to Vietnam’s General Statistics Office.

Vietnam’s economy last year expanded at its fastest rate in five years, growing by 6.68 percent, which was one of Southeast Asia’s strongest showings for the year, according to AFP.

In July 2014, Moody's Investors Service raised Vietnam's credit rating for the first time in nearly two years to B1 with a stable outlook (B1/stable), citing improving macroeconomic stability and a stronger position in its balance of payments, according to Reuters. The country’s credit rating has remained at this level.

Divergent growth prospects

ASEAN economies are likely to see differing growth outlooks in the 2016-2017 period against the backdrop of subdued global demand, said Moody’s.

"The growth prospects of ASEAN's major export-orientated economies - Singapore, Malaysia and Thailand - will remain weaker than those of more domestic demand-driven economies, like Indonesia and the Philippines, in 2016 and 2017," said Rahul Ghosh, a Moody's Vice President and Senior Research Analyst.

Export growth is slumping across the region, but the overall economic impact will vary based on the relative importance of trade to GDP.

Total trade, the sum of exports and imports, accounts for 346 percent of GDP in Singapore (Aaa/ stable), 131 percent in Malaysia (A3/stable) and 130 percent in Thailand (Baa1/stable), which is much higher than the 41 percent recorded for Indonesia (Baa3/stable) and 58 percent for the Philippines (Baa2/stable), according to Moody's.

"Singapore, Malaysia and Thailand are susceptible to a prolonged period of subdued global demand via both the export channel and weaker investment demand," said Ghosh.

"We forecast G20 GDP growth at 2.6 percent in 2016, similar to last year and rising to only 2.9 percent in 2017. And downside risks to global growth are increasing," he added.

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