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Vietnam’s economy shows resilience amidst global headwinds

Vietnam’s economy shows resilience amidst global headwinds

The article was posted on the East Asia Forum by Suiwah Dean-Leung – Honorary Associate Professor of Economics at the Crawford School of Public Policy, at the Australian National University

It says Vietnam’s GDP growth is projected by the World Bank to be around 6% for 2016 — higher than the large ASEAN economies of Indonesia, Malaysia and Thailand. This growth has been bolstered mainly by robust domestic demand and strong performance in manufacturing exports.

Retail sales rose by 9.5% during the year, indicating a healthy degree of consumer confidence supported by hikes in public sector wages as well as increases in incomes generally. Meanwhile, the purchasing managers’ index rose to 54 in November from 51.7 in October — any number above 50 signals an expansion in manufacturing output

Core inflation is low and headline inflation is at 4.9% on a year-on-year basis for 2016, mainly due to increases in administered prices for education and health.

The Vietnamese dong remained reasonably steady against the US dollar for much of the year, and foreign reserves rose steadily, according to the article.

However, cutbacks in oil production, weak external demand and falls in agricultural output due to drought have prevented economic growth from reaching the government’s earlier target of 6.5 to 6.8% for 2016.

Dean-Leung wrote that Vietnam’s economic outlook is mixed, as rising global economic uncertainty challenges Hanoi’s commitment to necessary medium-term structural reforms.

For the time being, Vietnam is maintaining macroeconomic stability as it will certainly face significant challenges such as increased uncertainties over international trade and investment, especially given the moribund status of trade agreements like the Trans-Pacific Partnership, the professor added.