World Economy

Vietnam Growth Steady at 6.7%

Vietnam Growth Steady at 6.7%Vietnam Growth Steady at 6.7%

Vietnam’s steady economic growth at near 7% this year will make it among the fastest-growing markets in the world. This is while the world’s largest emerging economies including Russia, Brazil and China falter.

Rising domestic demand and booming foreign direct investment are helping the Southeast Asian nation counter global threats that’s sparked a wave of stock selling and currency depreciation this year, Bloomberg reported.

That comes as the country begins a leadership transition this week that will set the tone for economic reform and growth. The Communist Party’s draft socioeconomic plan for 2016 to 2020 shows the nation will target as much as 7% average annual expansion.

“In a very subdued global environment, domestic demand is king,” said Trinh Nguyen, a Hong-Kong based senior economist for emerging Asia at Natixis SA. “People in Vietnam are becoming more optimistic about the future. In both the regional and global landscapes, it’s set to outperform.”

 Setting a Growth Path

Vietnam’s economy is forecast to expand 6.7% this year, the same pace as in 2015, according to Bloomberg surveys.

Communist Party officials gathering to choose the next party general secretary will also be tasked with setting a growth path that avoids a repeat of past mistakes, including soaring credit growth that saddled banks with bad debt and preferential treatment of state companies that created inefficiencies.

The central bank’s recent efforts to make the exchange rate more flexible will also strengthen macro-economic stability and help ease pressure on reserves, she said.

Meanwhile, private consumption rose 9.3% last year, according to government data. Disbursed foreign direct investment surged 17.4% to a record-high of $14.5 billion last year from 2014, official data showed.

The draft plan shows the government is aiming to lift gross domestic product per capita from $3,200 to $3,500 by 2020 compared with the International Monetary Fund’s estimate of about $2,171 in 2015. Inflation will be kept below 5% and the budget deficit capped at 4% of GDP.

“In 2016 and 2017, we definitely believe that Vietnam is positioned to be one of the fastest growth stories,” economist at Australia & New Zealand Banking Group Ltd. Eugenia Victorino said. “What could derail Vietnam’s fast growth story is if trade deficit widens due to much faster import growth from consumption-related items such as automobiles.”