SSI Predicts Vietnam Enjoy Better Growth in the Coming Time
In short, what SSI sees so far is stabilized inflation and better growth, a far cry from the performance of the stock market proactively reacting to the global economy.
Photo: GettyImages
Recently, SSI released the report commenting on macro economic environment in Vietnam. Regarding inflation, CPI edged up 0.33% MoM in October. The crawl upwards was mostly driven by a petroleum products price hike (gasoline: +3.45%, liquefied gas: +3.17%, kerosene oil: + 2.87%), as well as the impact from a subsidies removal in the educational sector, as 7 provinces get ready to raise tuition fees.
The food & foodstuff price was also a contributing factor towards higher inflation (rice: +0.99%, pork: +6.67%, similar to September data). Average CPI increased just 3.6% YoY in the first 10 months of 2018.
For retail sales, nominal growth is still high in Oct, at +12.4% MoM (year to date, +11.4% YoY). On YTD basis, real growth is still quite healthy at + 9.31% YoY, higher than last year’s level of 8.79%. Retail sales growth lit up the board across all segments, and we noted that international tourist arrivals are continuing to stage impressive growth at 17.6% YoY.
This continues on, tracing the tourism megatrend line as followed from previous months in general. Chinese and South Korean tourists are still the major drivers of tourism, growing at +28.8% and + 48.3% YoY respectively).
On the industrial front lines, the same story of growth in the manufacturing sector has continued onwards. The headline industrial production index increased by 10.4 % YoY, whereas the first 10 months of 2017 rose only by 9.6%).
Industrial production across key cities all increased at a pace higher than the headline numbers, i.e Ha Tinh (Nghi Son refinery, + 105.6%), Thanh Hoa (Formosa Steel, + 30.3%), Haiphong (LG, + 25.6%), Thai Nguyen (Samsung, + 12.2%), and Bac Ninh (a lot of FDI enterprises, + 11.9%).
Regarding investment, FDI disbursement in USD terms was at $15.1 bn year to date (or + 6.3% YoY) and FII at $6.3 bn (+35.8% YoY). Meanwhile, public investment disbursement also rose higher than average growth, but still lower than expected (at 55.1% of the 2018 plan).
The government promised to disburse capital faster over the next few months (for example more internationally-sourced ODA funding for Metro lines in Hanoi, Ho Chi Minh City, or the Long Thanh Airport land clearance), so we might have to be patient to see what effect it has in the next data release.
For the money market, VND remained at a high plateau all throughout the month at around VND 23300/23390. Fundamentally, VND saw no deterioration as the trade balance was in surplus, and the economy experienced an inflow in both foreign direct and indirect investments.
In short, what SSI sees so far is stabilized inflation and better growth, a far cry from the performance of the stock market proactively reacting to the global economy, during what has been quite a turbulent October.
The Free Trade Agreement (FTA) and Investment Protection Agreement (IPA) between Vietnam and the EU reached one step further towards final signature and ratification. A public hearing regarding the matter was conducted at the European Parliament on Oct 10th (Committee on International Trade).
During the hearing, chief negotiators, experts, and stakeholders from both sides exchanged views on benefits common values set out by the agreements, not only about business, but also on human rights, labor, or the environment.
During the hearing, the Vietnam side showcased Vietnam’s commitment for the EVFTA by starting to incorporate all of the ILO conventions in 2019 (as a part of the Labor Code revision), and by proactively implementing a number of clauses in the agreement even before signature and ratification took place.
With the support from ILO representatives, European Chamber of Commerce in Vietnam, and the UN Environment program, it’s expected that the ratification could be made before the Parliamentary election in May 2019.
Last but not least, the National Assembly started its last plenary session for 2018 from Oct 22nd to Nov 21st and elected Mr. Nguyen Phu Trong, the Party’s General Secretary, to be the next President of Vietnam.
The key focus remains upon the National Assembly meeting, with such key topics to discussed such as CPTPP ratification, additional investment into metro lines, and trade war concerns. With an expectation upon a more tame inflation expectation looking towards November, it could bring in some relief and mute the risk of higher interest rates from materializing.
