Rising foreign direct investment helped to accelerate economic growth in Viet Nam to 6.0% in 2014. Inflation abated, and robust external accounts enabled the rebuilding of foreign reserves. Growth is forecast to edge higher again this year and next, while inflation remains relatively low. Policy challenges are to reform banks and state enterprises and to integrate domestic firms into global value chains.
|Selected Economic Indicators (%) - Viet Nam||2015||2016|
|Current Account Balance (share of GDP)||3.1||1.5|
Source: ADB estimates.
The economy grew by 6.0% in 2014, the strongest pace since 2011. Industry expanded by 7.1%, against 5.4% in 2013, benefitting from foreign direct investment (FDI) that boosted growth in manufacturing to 8.5%. Recovery in demand for property lifted growth in construction to 7.1%. Agriculture picked up to grow by 3.5%, supported by higher exports of fish and shrimp.
By contrast, growth in services eased from the previous year to 6.0%, partly a result of fewer visitors from the People’s Republic of China (PRC), which hurt tourism. Total visitor arrivals increased by 4.0% in 2014 - a deceleration from 10.6% in 2013.
Growth in gross domestic product is forecast to edge up to 6.1% in 2015 and 6.2% in 2016, with FDI an important driver. Data from the Foreign Investment Agency show that new FDI commitments rose to $15.6 billion in 2014, while an additional $4.6 billion was committed to existing foreign-funded projects.
Better economic performance in the major industrial economies - particularly the United States, Viet Nam’s biggest export market - will spur exports, but this positive effect will be partly offset by slowing growth in the PRC. Exports of manufactured products will continue to expand, given that 76% of last year’s disbursed FDI was directed into manufacturing.
Excerpted from the Asian Development Outlook 2015.