Drought has severely hit Vietnam's agricultural production. (Photo: dangcongsan.vn)
Vietnam is still in a position to outperform its regional peers despite missing gross domestic product (GDP
) growth expectations in the first quarter (Q1) of this year, ANZ
says in its latest note.
The large miss in Q1 GDP growth at 5.5% year-on-year (y/y) was mainly due to the contraction in agricultural output. “There are increasing indications that agricultural exports may be in for a tough year on the back of prolonged effects of El Niño,” Eugenia Victorino, ASEAN Economist at ANZ says.
“The 5.5% y/y expansion in the first quarter puts downside risks to our own 6.9% forecast for 2016 and 6.5% in 2017,” says the economist.
According to the bank, Vietnam’s inflation
will not necessarily surge immediately while food supply will likely be tighter. Its headline inflation will likely be capped to average 1.7% in 2016 and 2.5% in 2017 by the slow rise of oil prices.
A $776 million year-to-date trade surplus has eased the upside pressure on the USD/VND rate, allowing the State Bank of Vietnam to rebuild its forex reserves, ANZ adds.