HSBC Cuts 2017 GDP Forecast for Vietnam to 6.0%, Warns of Reliance on FDI

Minh Anh

13:10 20/07/2017

BizLIVE - The downward revision was due to the country's sluggish start in the first quarter.

HSBC Cuts 2017 GDP Forecast for Vietnam to 6.0%, Warns of Reliance on FDI

HSBC has cut Vietnam's GDP growth projections to 6.0% this year. Photo: Internet

HSBC has pared back its full-year GDP growth forecast for Vietnam from 6.4% to 6.0% in 2017, due to the country’s sluggish start in the first quarter (Q1) this year, according to the bank’s monthly update.
According to HSBC researchers, at 6.2% year-on-year, Vietnam’s Q2 growth accelerated quicker than the bank’s initial forecast of 5.9% due to a sharp increase in exports and industrial output, particularly in smartphones.
“This year’s higher-than-expected Q2 growth is promising for the rest of the year. We expect the economy to gain momentum on the back of stronger agricultural output and a pick-up in FDI,” says the report.
Growth in Q1 hit a three-year low of 5.2%, largely due to a slump in electronics exports. Samsung Electronics, which accounts for about 20% of the country’s shipments, ended production of its Galaxy Note 7 smartphone last October due to a battery failure, significantly impacting Vietnam’s growth.
The bank pointed out that industrial production picked up in Q2 as assembly of Samsung’s Galaxy S8 kicked into gear and construction accelerated.
Vietnam’s service sector remains on a strong footing on the back of a tourism boon, evidenced by a strong rise in international tourist arrivals. “We expect tourism to remain steady for the remainder of the year, especially as the government extends its visa-waivers to selected countries to June 2018, barring any natural disasters.”
The bank said a continued slump in the mining sector has been part of the reason why Vietnam has been unable to consistently reach its previously higher levels of growth, despite healthy expansion in other sectors.
The overall pickup was also attributed to resilient exports, driven by shipments of phones and spare parts, and electronic components.
HSBC noted that the foreign invested sector continues to drive export growth, while exports from the domestic sector have recently grown more slowly on a y-o-y basis.
As in the past, growth in the foreign invested sector has also remained consistently above the domestic sector. “While not a new phenomenon, these trends highlight the potential for the country, as it moves forward with privatizing SOEs, in order to boost domestic manufacturing productivity and to improve its trade position.”
The second quarter data further highlights the country’s reliance on industrial production and exports (particularly from the foreign invested sector) to maintain high growth, the report stresses.
The country continues to receive steady foreign direct investment, which enables it build international reserve buffers and hopefully diversify toward higher value-added manufacturing.

 

MINH ANH

Từ khóa: HSBC, GDP, Samsung, Vietnam

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