Vietnam Outlook for 2018

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The year 2017 certainly ended with a bang, with an amount of US$ 5 billion going straight into the foreign exchange reserves as a result of the sale of 53% of the Governments holding in brewing company SABECO to Thai Beverage.

So what does Vietnam have in store for 2018?

The Government has set a target for GDP growth of 6.7% the same as their target for 2017, which should be attainable and is in line with the World Bank’s own forecast. Inflation, which rose 3.5% in 2017 is forecast to remain under 4%. With the Government’s ability to regulate process of State-managed items there is no reason why inflation should not be contained within 4%.

The record levels of FDI in 2017 seem set to continue in 2018 especially with the probable ratification of the EU Vietnam Free Trade Agreement and the re-started discussion on the TPP ex USA. Japanese and Korean companies, the biggest investors in 2017, continue to have a high growing interest from Thailand and other Asian markets. However, we should see continued growth and interest in investments from Europe and USA. There is also strong support from the American business community for a USA – Vietnam bi-lateral trade agreement.
Manufacturing and retail are expected to be significant beneficiaries of FDI in 2018.

With the continued growth of FDI and also the coming into operation of investments committed in 2016 and 2017 there is no reason why this year should not see further significant growth in exports. With the focus on Vietnamese companies becoming part of the global supply chain one can hopefully look forward to possible further trade surpluses. The government targets an 8-10% growth in exports but this somehow looks to be quite conservative.

Provided the Government does not intentionally pursue a policy to devalue the Vietnamese dong, and there is no indication of this, then the dong can be expected to remain reasonably stable against major currencies and the writer would not expect more than a 1 to 2% devaluation at the outside.

With the Government’s continued commitment to reduce the administrative bureaucracy and the above fundamentals there is nothing to suggest (short of external shocks) that the Vietnamese economy will not continue the strong performance seen in 2017.

Kenneth M Atkinson
Executive Chairman of Grant Thornton Vietnam

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