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Vietnam Today

WB: 2018 growth at 6.8%, 2019 6.5%

Released at: 17:14, 06/06/2018

WB: 2018 growth at 6.8%, 2019 6.5%

Illustrative image from doisong.vn

Economy robust but capacity constraints to impact over time.

by Doanh Doanh

Growth in Vietnam remains robust but high capacity-use rates may limit further expansion, according to the World Bank’s “Global Economic Prospects: East Asia and Pacific - The Turning of the Tide?” report released on June 5. The country is forecast to grow by 6.8 per cent this year before moderating to 6.5 per cent in 2019 as capacity constraints become more binding.

In the meantime, economic conditions in developing East Asia and Pacific have for the most part remained favorable in 2018, including robust global trade, mostly contained borrowing costs, and sustained capital inflows. Growth across the region remains solid and exports have surged in both volume and value terms. Private consumption has been supported by strong consumer confidence and rising household wealth in an environment of moderate inflation. Investment spending in the region has also been strong.

Regional financial markets have generally remained buoyant, despite volatility in early and mid-2018 related to the prospects of faster monetary policy tightening in advanced economies and escalating trade tensions. Bond spreads in some countries have increased, following bouts of volatility in stock markets, but remain close to the low levels that prevailed in 2017. Domestic monetary conditions have tightened somewhat and tighter prudential policies have kept credit growth in check.

Domestic demand in China has been solid in 2018, reflecting robust consumption growth and recovering private fixed asset investment. The stock of corporate debt has continued to decline as a per cent of GDP in the first half of 2018 but remains high by international standards. China recorded its first current account deficit since 2001 in the first quarter of 2018, consistent with external rebalancing.

Among commodity exporting economies of the region, an investment-led cyclical recovery has continued in response to higher commodity prices, improved confidence, and low financing costs. Indonesia has continued to register strong growth this year, and growth continues to recover in Mongolia. Growth moderated in Malaysia but remains robust and broad-based.

In terms of outlook, growth in developing East Asia and Pacific is projected to ease from an upwardly revised 6.3 per cent in 2018 to 6.1 per cent in 2019. The modest slowdown in regional growth is largely due to the gradual structural slowdown in China. Excluding China, activity in the region is expected to slow from 5.4 per cent in 2018 to 5.3 per cent next year. The outlook is predicated on moderately higher commodity prices, strong but gradually moderating global demand, and incremental tightening of global financing conditions.




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