China Woes May Slow Vietnam Economic Growth down in 2016, Says VCB Securities

Tuan Minh

10:29 22/01/2016

BizLIVE - Vietnam’s economic expansion is forecast to slow down to 6.3%-6.4%, partly due to China’s struggling economy, a brokerage house has said.

China Woes May Slow Vietnam Economic Growth down in 2016, Says VCB Securities

Tan Cang - Cat Lai port, the most advanced container port in Vietnam. (Photo: Internet)

Vietnam’s gross domestic product (GDP) is predicted to grow 6.3%-6.4% in 2016, below an expansion of 6.68% in 2015, Vietcombank Securities (VCBS) said in a report released on Thursday.
Vietnam could face headwinds from the world’s tormenting economy, especially negative effects from China’s. “The adverse impact from the world’s second-largest economy is putting heavier pressure on the Vietnamese economy,” the securities firm noted.
“With clear signals of economic slowdown, China can ‘export crisis’ to other countries, especially those being its large trade partners and having close geographic proximity, including Vietnam,” it added.
The recently-concluded free trade agreements (FTAs), including the Trans-Pacific Partnership (TPP) will give a boost to the Vietnamese economy in the medium and long term, while their impact will not be large in the short term.
The export sector, mainly driven by foreign-invested enterprises, is expected to remain the largest engine to pull the local economy up. Meanwhile, the improvement of domestic demand was modest in 2015, with an increase of 8.4% last year, excluding the inflation factor.
VCBS forecast that the country’s consumer prices would rise 2.5% this year, compared to 0.6% in 2015. A trade deficit of between $2 billion and $3 billion is projected for this year, compared to a shortfall of $3.54 billion in 2015.
The brokerage house assessed that external factors, which include the strengthening of the U.S. dollar and the continued devaluation of the Chinese yuan, will continue to cause volatility of the USD/VND rate this year.
“In a quite positive scenario without drastic changes, we expect the Vietnamese dong to weaken 4%-5% against the U.S. dollar in 2015,” says the VCBS report.