This economy now enters its third year of macroeconomic stability with lower inflation, strong external trade and capital flows, and a firmer exchange rate. Growth in gross domestic product (GDP) edged up in 2013 and is expected to recover further over the next 2 years. Inflation is forecast to remain relatively subdued. A return to the faster economic growth of previous years is hampered by the cautious pace of reform to banks and state enterprises.
Economic growth picked up slightly to 5.4% in 2013, still well below the 7.0%-8.0% pace seen in 2004-2007. Services accelerated to 6.6%, making the biggest contribution to GDP growth. Hotels and restaurants grew by 9.9%, buoyed by an 11% increase in tourist arrivals, and banking and finance expanded by 6.9%, helped by easier credit. Reflecting subdued private consumption, growth in wholesale and retail trading decelerated to 6.5%.
The improved services performance offset a slowdown in industry, which grew by 5.4%.
Agriculture and fisheries maintained modest growth at 2.7%. Fisheries now contribute 20% of this sector’s output, about double their share 10 years ago.
From the demand side, increases in foreign direct investment and off-budget government outlays on infrastructure drove a 5.5% expansion of investment. This was from a low base in 2012, and gross capital formation as a ratio to GDP remained, at 27% in 2013, far below earlier peaks. Weakness in the labor market and lackluster consumer confidence held growth in private consumption to 5.2%. Public consumption rose by 7.3% in line with the government’s policy to grow recurrent expenditure. Net exports of goods and services also contributed to GDP growth.
|Selected Economic Indicators (%) - Viet Nam||2014||2015|
|Current Account Balance (share of GDP)||4.1||3.0|
Source: ADB estimates.
Official statements indicate that the government will act to support economic growth in the next 2 years, though its priority is to maintain macroeconomic stability. Forecasts assume policy stimulation will be moderate and that the government will make further gradual progress on structural reform to the financial sector and state-owned enterprises.
Data for the first quarter of 2014 show that GDP rose by 5.0%, slightly faster than in the year-earlier quarter. Services expanded by 6.0% in January-March, industry and construction by 4.7%, and agriculture by 2.4%. As a sign of how the year started for manufacturing, the purchasing managers’ index for February showed that output continued to grow, but the pace eased to the slowest in 4 months.
GDP growth is forecast to rise slightly to 5.6% in 2014, picking up further to 5.8% in 2015 with economic recovery in the United States and the euro area and as progress is made in addressing domestic banking sector weaknesses.
Source: ADB. 2014. Asian Development Outlook 2014. Manila.