Last updated: Monday, May 20, 2013
Vietnam Keeps Growing despite Dip in ExportsPosted: Sunday, June 03, 2012
This finding comes from the quarterly Economic Insight report by the Institute of Chartered Accountants in England and Wales (ICAEW). Accordingly, Vietnam’s economy will continue growing as monetary easing by the State Bank of Vietnam alleviates a banking system filled with bad loans. Exports are expected to dip across the whole of ASEAN, but the region is remaining resilient.
The ICAEW report Economic Insight: South East Asia, produced by Cebr (The Centre for Economics and Business Research), undertakes a quarterly review of South East Asian economies, with a focus on the six largest countries; Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Although inflation remains a concern, rising oil prices and increased regional integration is expected to benefit Vietnam. With a current surplus of oil exports, the country will benefit from high energy costs, and integration with ASEAN will allow for greater economies of scale in the region, even as wages in China increase and no longer act as a brake on inflation.
“We are seeing an increase in inflation, partly driven by the rise of a new affluent Asian consumer, with a higher disposable income and the ability to afford more and better goods,” said Charles Davis, ICAEW Economic Advisor and Head of Macroeconomics, Cebr. “Their growing demands have exceeded what the increasingly scarce amounts of energy and depleting surplus of Chinese labour could previously supply, thus exerting inflationary pressures worldwide. This has particularly been the case in Vietnam where double digit inflation has been an unwelcome trend. However, there are tentative signs of inflation falling back, which could help to give the central bank more room for manoeuvre as the global economy cools.”
Power struggles in Asia are also playing a more prominent role as economic growth slows across the world. Tensions between the Indian government and international businesses operating in the BRIC nation are grabbing headlines, while the high profile sacking of Bo Xilai in China have highlighted ideological differences within the governing body of Asia’s largest economy.
Mark Billington, Regional Director, ICAEW South East Asia, said: “As ASEAN economies become larger and more complex, political and institutional frameworks will need to evolve alongside them. History suggests this is not always a smooth transition, but this need not be a problem for the region as long as countries are able to adapt successfully. Prospects for ASEAN growth look bright, as long as institutional evolution can keep pace with the economy.”
Thailand would be the hardest hit ASEAN country as imported oil stood at 12.5 percent of its GDP in 2011. Countries that do not produce oil, namely Cambodia (7.6 percent of GDP) and Laos (5.0 percent) would also be greatly affected. However, neighbours Brunei and Singapore, each of whom reported oil exports at approximately 80 percent and 40 percent of their respective GDPs, would mitigate these effects.
Vietnam is expected to pick up some of China’s manufacturing industry while the suspension of sanctions in Myanmar is predicted to attract foreign investments. Overall, both countries can expect more the 5 percent growth between now and 2014, despite an expected 2012 dip in growth owing to weaker exports.
Cebr predicts services to increase their share of national output at a rate of 7.8 percent per annum, from 48 percent in 2011 to 54 percent in 2020. This exceeds the forecasted annual GDP growth of 7.8 percent. A plausible explanation for this rising demand is the higher household expenditure on travel, tourism, and entertainment, as well as healthcare, educational and business services required by the increasing complexity of its industrial base.