The slowdown in Vietnam’s GDP
growth in the first quarter (Q1) this year is only a “minor setback” and the manufacturing sector has the potential to lift growth in the coming quarters, HSBC
has said in a report.
The country’s Q1 economic growth
slowed to a three-year low of 5.1% year-on-year. The slowdown was attributed to weather disruptions that curtailed agricultural output, and a deceleration in construction growth.
Although, mining and quarrying has been ailing for some time now, the recent drop in coal prices likely intensified the drag from this sector, says the report.
The Vietnamese economy took a hit when Samsung Electronics Co. cut production of smartphones following the kill-off of the Galaxy Note 7 phone. A drop in Samsung’s output in Vietnam contributed to a 10.7% contraction in exports of phones and parts, dragging down electronics production.
The UK bank expects exports to rebound soon, helped by Samsung’s new product launches and a gradual revival of global demand, which is reflected in the sustained increase in overseas orders in PMI surveys.
In the March survey, the rate of growth in new export orders was the fastest in 2017 so far. Additionally, manufacturers remained strongly confident that output will increase over the coming 12 months, thanks to expectations of higher new orders and business expansion plans, the bank’s economists explain.
The report notes that inflation is gradually easing, even in the face of higher energy prices and increased costs of healthcare and education, owing to muted food inflation.
“The GDP print highlights the economy’s sensitivity to manufacturing cycles, especially high tech. To broaden growth drivers and, as such, help reduce the volatility of economic output, further reforms would help, especially with regard to state-owned enterprise efficiency and the creation of fiscal buffers,” it stresses.