Vietnam is expected to remain the fastest-growing economy in the Association of Southeast Asian Nations (ASEAN) in the near term, with 2019 growth projected at 6.9%, Standard Chartered said in its latest macroeconomic research report.

Employees work at a foreign-invested firm that makes mobile phone parts.
Standard Chartered forecasts Vietnam will remain the fastest-growing ASEAN
economy in the near term – Photo: VNA 

The forecast is highlighted in the bank’s recently published Global Focus - Economic Outlook report for the third quarter of 2019, titled “The dovish wave grows.”

The foreign direct investment (FDI)-driven manufacturing sector, which is poised for a fourth consecutive year of double-digit growth, will continue to be a key growth driver, the bank noted.

“Vietnam’s growth prospects remain strong, with macroeconomic conditions staying stable in the first half, which is likely to continue towards year-end. We expect growth to accelerate mildly in the second half from 6.7% in the first half,” said Chidu Narayanan, a senior economist in charge of Asia at Standard Chartered Bank.

According to the report, FDI inflows will stay robust this year, particularly to the manufacturing sector, totaling US$18 billion.

Vietnam’s export growth is likely to remain steady and outperform its peers. Electronics exports, which make up about a third of the total, are likely to be less supportive than in recent years, due to slowing external demand and lower semiconductor prices.

Improving traditional exports – textiles and agriculture – should continue to take up some of the slack, added the bank.

Import growth is expected to remain close to 10% on slowing capital-goods imports; this should keep the trade balance in surplus in 2019.

The report also suggested that the State Bank of Vietnam will remain accommodative in the near term to support growth, with still-modest inflation giving it sufficient space to maneuver.

Standard Chartered Bank forecasts that inflation will pick up modestly in the second half of this year, averaging 2.8% compared with 2.6% in the first half, while core inflation, which excludes the prices of food, energy, healthcare and education services, might edge up to 2% in 2019.

The bank’s economists also expected unchanged policy rates in 2019 and mild appreciation of the Vietnamese dong.

They forecast the dong would remain supported near-term by the stable current account surplus and strong FDI inflows and that the exchange rate between the dong and the US dollar would be VND23,100 at end-2019 and VND23,000 in mid-2020.