The forecast is highlighted in the bank’s recently published Global Research report on Vietnam, entitled “Vietnam – Fast, not furious, growth”. Manufacturing and agriculture are likely to remain the primary growth drivers in the second half.
Vietnam grew 7.1% in H1, moderating mildly in Q2 after a record 7.4% growth year-on-year in Q1, in line with the forecast. This is the first year since the global financial crisis that Q2 growth has been slower than Q1.
“We believe this is a sign of a focus on sustainable growth over the medium term. We expect H2 growth to remain robust, albeit mildly slower than in H1,” said Chidu Narayanan, economist for Asia of Standard Chartered Bank, in a statement.
“We remain positive on Vietnam’s growth, medium term, on strong manufacturing activity, as FDI inflows to electronics manufacturing remain strong,” he added.
According to the latest macro-economic research report, manufacturing is projected to record another year of double-digit growth, while agricultural growth will continue its recovery in H2, even as construction slows due to more modest growth in the real-estate sector.
At the same time, the growth in electronics export is likely to stay robust, albeit lower than in 2017, leading to a trade surplus and supporting overall growth.
The bank maintains its views that FDI inflows will stay strong in 2018 and 2019-20, with registered capital of close to US$17 billion each year, and FDI inflows to the manufacturing sector, particularly electronics manufacturing, will remain high in the medium term.
The study also expects steady growth in services to support overall growth in 2018, led by strong domestic trading activity. The services sector, which makes up close to 40% of the economy, is likely to remain robust in H2, after rising by a steady 7.0% year-on-year in H1.
The rise of the business process outsourcing (BPO) sector, aided by a young, well-educated, low-cost labor force, should grow in the support services sector in the medium term.
On the forex outlook, Standard Chartered economists have raised their USD-VND forecasts to 23,400 by end-2018 and expect a small VND depreciation in early 2019, before ending 2019 mildly stronger against the USD, as positive domestic and external factors support the currency.
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