A view of downtown Ho Chi Minh City, the driver of Vietnam's economy. (Photo: Minh Tuan/BizLIVE)
Vietnam’s gross domestic product (GDP
) is likely to grow 6.9% in 2016 despite the existence of the downside risks emanating from the contraction in agricultural output, ANZ
said in a note titled “Greater Mekong outlook” released on March 31.
The Australian bank expects Vietnam’s economic growth to slow to 6.5% in 2017.
ANZ’s forecasts are similar to those released by the Asian Development Bank (ADB), which has put Vietnam’s growth forecast at 6.7% in 2016 and 6.5% in 2017.
The country’s GDP growth of 5.6% quarter-on-quarter in Q1 missed ANZ’s estimate of 6.2% as agricultural output contracted by 1.2% year-on-year. The robust growth in construction and services, though faster than the growth in Q1 2015, was not enough to offset the weakness in agriculture.
ANZ noted that interest rates may rise as VND liquidity will likely remain adequate, assuming the State Bank of Vietnam allows sufficient flexibility in the USD/VND
“However, so long as the central bank keeps a cap on deposit rates in the hope of discouraging inefficient use of capital, the room to raise policy rates is limited,” says the note.
The Australian bank notes that Vietnam and other countries have opportunities to boost apparel exports although China is currently the leading textile apparel exporter. The ratification of the EU-Vietnam free trade agreement (FTA) will likely benefit textile apparel exports from the Southeast Asian country.