Faster Gross Domestic Product growth in Viet Nam, at 6.3% in the first half over the same period in 2014, was driven by strong expansion in manufacturing, construction, and mining.
|Selected economic indicators (%)||2015||2016|
|ADO 2015||Update||ADO 2015||Update|
|Current Account Balance (share of GDP)||3.1||0.5||1.5||1.0|
Source: ADB estimates.
Sustained inflows of foreign direct investment into manufacturing have propelled Viet Nam’s exports in recent years. Private consumption is growing robustly, supported by low inflation, higher off-farm employment, and improved consumer confidence.
Inflation subsided to 0.8% year on year in the first 8 months, continuing a steep decline since 2011, and the forecast for 2015 is revised down from March.
In contrast with most other subregional economies, Viet Nam recorded solid growth in merchandise exports in the first half. Still, imports rose at a much faster pace than exports, reflecting strong domestic demand for capital and consumer goods. A lower trade surplus cut the current account surplus. Forecasts for current account surpluses are lowered from March, particular for 2015. The central bank devalued the Viet Nam dong against the US dollar three times in the first 8 months, by 1% each time, to support the competitiveness of exports.
As these economic trends are projected to continue, growth forecasts are raised from the Asian Development Outlook 2015 report.
Growth in credit has picked up and looks likely to exceed the government’s target. Fiscal policy supports economic growth, though concerns over rising public debt could prompt a tightening next year. The outlook for trade and investment is bolstered by an easing of restrictions on foreign investment in shares and property and by the conclusion in August of a Viet Nam–European Union freetrade agreement.
By the end of 2015, inflation is seen rising to 2.0%. The forecast for 4.0% year-average inflation in 2016 is retained.
Excerpted from the Asian Development Outlook 2015 Update.