QNB Group has published today its Vietnam Economic Insight 2016 report. Vietnam is a standout performer amongst emerging markets, led by strong export growth and firming domestic demand.
- Despite uncertainty surrounding the future of the Trans-Pacific Partnership (TPP), Vietnam’s export outlook is positive having concluded trade deals with South Korea and the European Union
- That being said, we expect real GDP to moderate in 2016 caused by a major agricultural drought, lower commodity prices squeezing producers and weaker external demand
- Thereafter, real GDP growth should pick up to 6.2% in 2017 and 6.4% in 2018 as demand for Vietnam’s exports picks up again reflecting the influence of new trade deals as well as continued growth in investment and consumer spending
Real GDP (%, year-on-year)
Sources: General Statistics Office of Vietnam (GSOV), Haver Analytics and QNB Economics forecasts
- Inflation is expected to rise to 2.8% in 2016, supported by higher prices for food, housing and currency depreciation
- In 2017, inflation should reach 3.7% and remain stable thereafter in 2018, reflecting a pickup in global commodity prices, the recovery in house prices and strong domestic demand
Inflation (%, annual average)
Sources: GSOV, Haver Analytics and QNB Economics forecasts
- We expect the deficit to widen in 2016 to 6.1% of GDP from 5.9% in 2015 on slower growth in revenues on account of weaker export growth and continued investment and social spending
- The deficit budget is expected to be stable around 6.1% in 2017 and 2018 as revenue growth from higher commodity prices and stronger economic activity will be matched by continued expenditure growth to meet investment and social spending objectives
- As a result, we expect public debt to reach 62.2% of GDP by 2018
Fiscal balance (% of GDP)
Sources: GSOV, Haver Analytics and QNB Economics forecasts
The current account surplus is expected to widen in 2016 to 0.8% of GDP primarily as result of slower import growth
But the current account should recede to around 0.4% in 2017 and 2018, as oil prices climb, making imports more costly, therebypartly offsetting export growth
Current Account (% of GDP)
Sources: State Bank of Vietnam, Haver Analytics and QNB Economics forecasts
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