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Vietnam Business Forecast Report Q1 2015

  • November 2014
  • -
  • Business Monitor International
  • -
  • 46 pages

Core Views

Vietnam will remain susceptible to maritime confrontations with China, despite the recent easing of tensions. Meanwhile, Vietnam will continue to court India and the US in a bid to counterbalance China's growing influence in the region. That said, Hanoi will seek to avoid a breakdown in relations with Beijing, given China's importance
as a trade partner.
We expect solid growth momentum in the Vietnamese economy to be carried over to 2015, on the back of continued foreign direct investment inflows, strong performance in the manufacturing and export sectors, and ongoing efforts by the government to address the high level of bad debts in the banking sector. We maintain our forecast for real GDP to grow at 5.7% in 2014, ahead of an acceleration to 6.4% in 2015.
Vietnam's external health will improve gradually over the coming years, as we expect a gradual narrowing of the country's fiscal deficit. We forecast for Vietnam's external debt as a share of GDP to fall from an estimated 37.6% in 2013 to 22.0% by 2023. While Vietnam is enjoying strong economic growth and low inflation, we expect the State Bank of Vietnam to cut its benchmark interest rate by 50 basis points to 6.00% in 2015 to support flagging local businesses and spur credit growth. This would push government bond yields lower. However, further yield compression thereafter will be limited owing to expected strong GDP growth. On the back of an improving Vietnamese economy, fiscal reform efforts by Hanoi should lead to an improvement in the country's fiscal health and limit growth in public debt. We forecast the country's budget deficit to narrow from 4.7% in 2013 to 3.8% in 2014 and 3.0% in 2015.

Table Of Contents

Vietnam Business Forecast Report Q1 2015
Executive Summary 5
Core Views 5
Key Risks To Outlook 5
Chapter 1: Political Outlook 7
SWOT Analysis 7
BMI Political Risk Index 7
Domestic Politics 8
Risk Of Renewed Maritime Tensions Remains 8
Vietnam will remain susceptible to maritime confrontations with China, despite the recent easing of tensions. Meanwhile, Vietnam will
continue to court India and the US in a bid to counterbalance China's growing influence in the region. That said, Hanoi will seek to avoid
a breakdown in relations with Beijing, given China's importance as a trade partner.
TABLE: Political Overview 8
Long-Term Political Outlook 10
Key Political Challenges Over The Coming Decade 10
Vietnam's biggest political question over the coming decade is whether one-party rule under the Communist Party of Vietnam (CPV) will
face growing calls for democratisation, as was the case in other major South East Asian countries. While our core scenario envisages
the CPV transforming itself into a technocratic administration, it faces major economic challenges which if mismanaged could lead to
widespread unrest. On the foreign policy front, we expect an increasingly powerful China to drive Vietnam further into the camp of Asian
nations with close relations with the US.
Chapter 2: Economic Outlook 13
SWOT Analysis 13
BMI Economic Risk Index 13
Economic Activity 14
Expecting Sustained Growth Momentum In 2015 14
We expect solid growth momentum in the Vietnamese economy to be carried over to 2015, on the back of continued foreign direct
investment inflows, strong performance in the manufacturing and export sectors, and ongoing efforts by the government to address the
high level of bad debts in the banking sector. We maintain our forecast for real GDP to grow at 5.7% in 2014, ahead of an acceleration
to 6.4% in 2015.
TABLE: Eco nomic Activit y 14
Fiscal Policy 15
Gradual Fiscal Recovery Amid Positive Growth Outlook 15
On the back of an improving Vietnamese economy, fiscal reform efforts by Hanoi should lead to an improvement in the country's fiscal
health and limit growth in public debt. We forecast the country's budget deficit to narrow from 4.7% in 2013 to 3.8% in 2014 and 3.0 % in
TABLE: Fiscal Policy 16
Monetary Policy 17
Rate Cuts In 2015 To Spur Further Yield Compression 17
While Vietnam is enjoying strong economic growth and low inflation, we expect the State Bank of Vietnam to cut its benchmark interest
rate by 50 basis points to 6.00% in 2015 to support flagging local businesses and spur credit growth. This would push government bond
yields lower. However, further yield compression thereafter will be limited owing to expected strong GDP growth.
TABLE: Moneta ry Polic y 17
External Position To See A Gradual Improvement 19
Vietnam's external health will improve gradually over the coming years, as we expect a gradual narrowing of the country's fiscal deficit.
We forecast for Vietnam's external debt as a share of GDP to fall from an estimated 37.6% in 2013 to 22.0% by 2023.
TABLE: Current Account 19
Chapter 3: 10-Year Forecast 21
The Vietnamese Economy to 2023 21
2014-2023: A New Focus On Quality Growth 21
Vietnam's growth prospects over the next decade remain positive in our view, as reflected by our bullish forecasts for real GDP growth
to average 6.2% over 2014-2023. We foresee a more stable economic environment, with inflation averaging a benign 4.9% and the
current account remaining in surplus averaging over the forecast period.
TABLE: Long-Term Mac roeco nomic Forecasts 21
Chapter 4: Operational Risk 25
Operational Risk Index 25
Operational Risk 26
TABLE: Operational Risk 26
Transport Network 28
TABLE: Asia-Transport Network Risk 28
Economic Openness 31
TABLE: Asia -Eco nomic Ope nness 31
TABLE: Top 5 Products Impo rted (USDmn) 32
TABLE: Top 5 Trade Partners Product Expo rts (USDmn) 33
Chapter 5: Key Sectors 35
Infrastructure 35
TABLE: Construction and Infrastructure Industry Data 36
table: Construction and Infrastructure Industry Data 37
Oil and Gas 38
TABLE: Oil Production 39
TABLE: Oil Production 39
TABLE: Gas Production 40
TABLE: Gas Production 40
Other Key Sectors 43
Table: Food and Drink Sector Key Indicators 43
Table: Autos Sector Key Indicators 43
Table: Defence and Security Sector Key Indicators 43
Table : Pha rma Secto r Key Indicato rs 44
Table : Telecoms Secto r Key Indicato rs 44
Table : Freight Key Indicato rs 44
Chapter 6: BMI Global Assumptions 45
Global Outlook 45
Reality Check: Uncertainty Reigns 45
Table : Global Assumptio ns 45
Table : Developed States , Real GDP Growt H, % 46
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, % 46
Table : Eme rgi ng Markets , Real GDP Growth , % 47

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