Transport and energy infrastructure key growth drivers in Vietnam

Wednesday, July 4, 2018 - 18:41
2 -min read
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Vietnam’s economy grew 7.1 per cent in the first half of 2018, mainly driven by industry, construction and services - particularly wholesale and retail, transport, banking and finance, education and healthcare. Industry and construction expanded 9.07 per cent, while services rose 6.9 per cent.

While growth slowed to 6.8 per cent in 2Q18 owing to high base effects, high transport and energy infrastructure investments will still remain key growth drivers in the second half of 2018, said UOB economist Manop Udomkerdmongkol in a note.

Industrial production will likely be boosted by continued opening of new multinational enterprises in export-oriented manufacturing and processing industries. In the first four months of 2018, these industries attracted foreign direct investments (FDI) worth US$4.5 billion, accounting for 55.6 per cent of total FDI.

UOB believes that exports and tourism will benefit from a broad-based global recovery, and private consumption should be supported by rising household income and an expansion in private credit.

But the economy is still vulnerable to economic risks amid rising global protectionism and escalating trade tensions between the US and China - Vietnam’s two largest trading partners.

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The strong growth eases pressure on the government to add more stimuli to achieve its annual growth target of 6.7 per cent. Hence, another policy rate cut may not be on the cards, even as other Asian central banks have started to pursue monetary policy normalisation by raising policy rates gradually.

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