Vietnam will likely to outperform in the region although the UK leaving the European Union (EU) will rattle the global economy, the Australia-New Zealand Banking Group (ANZ
) has said in its latest report.
“Vietnam remains the Asian economy that continues to withstand the multitude of global challenges that have culminated in Asia’s “trade recession” much better than its relative peers,” says the report.
The bank cites the large cumulative FDI inflows, the ongoing upskilling, the diversification of the export base, a gradual depreciation of the Vietnamese as drivers for this external resilience.
Even with Brexit, Vietnam is still positioned to benefit from a trade agreement with the European Union (EU), specifically in the export of textiles, footwear, rice and other agricultural products, it adds.
However, the bank highlights that agriculture is emerging both as a drag on growth as well as a boost to inflation
as the rice harvest in the Mekong Delta is predicted to contract by more than 9% year-on-year in 2016.
Agricultural production will likely increased 1.2% this year, marking its weakest output growth since the GDP
series was rebased in 2012.
The effect of the agricultural slowdown will provide a boost to the country’s headline inflation, which is projected to average 2.4% year-on-year in 2016 and rise further to 3.3% in 2017, according to ANZ.
The bank slashes its GDP growth forecast for Vietnam to 6.4% in 2016 from 6.9% due to softness in agricultural output while keeping its 2017 forecast at 6.5%.