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Market Research Report

Vietnam Country Risk Report Q4 2019

Published by Fitch Solutions, Inc. Product code 177811
Published Content info 61 Pages
Delivery time: 1-2 business days
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Vietnam Country Risk Report Q4 2019
Published: August 21, 2019 Content info: 61 Pages
Description

We at Fitch Solutions maintain our forecast for Vietnam's real GDP growth to come in at 6.5% in 2019, down from 7.1% in 2018. In addition to unfavourable base effects over the remainder of 2019, slowing global demand will weigh on manufacturing growth. That said, robust growth in construction activity and services will likely continue to provide some support to the overall growth print.

We maintain our view for the State Bank of Vietnam (SBV) to hold its benchmark refinancing and discount rate at 6.25% and 4.25% respectively, in addition to maintaining its 14% credit growth target for the remainder of 2019. We expect the SBV to continue managing financial stability risks through loan directives and macro-prudential measures.

At Fitch Solutions, we maintain our forecast for Vietnam's fiscal deficit to remain wide at 5.7% in 2019, following a revised 5.9% fiscal deficit recorded in 2018. We continue to expect Vietnam's open-door trade policy and the slow progress of state-owned entity divestment to pressure revenue collection. However, falling yields of newly issued government securities will likely help to ease the upside pressure on expenditures from interest payments.

We continue to expect the Vietnamese dong to remain broadly stable against the greenback over the near term, supported by robust foreign direct investment inflows and foreign borrowing by domestic banks. Over the longer term, we maintain our view for the dong to remain on a gradual depreciatory path against the US dollar, due to its overvaluation and Vietnam's higher inflation vis-a-vis the US. In light of the VND stability over H119, we are revising our forecasts for the unit to average VND23,300/USD in 2019 and VND23,475/USD in 2020, from VND23,440/USD and VND23,850/USD previously.

At Fitch Solutions, we see a continuation of tensions in the South China Sea between Vietnam and China. We expect disputes to persist as long as China continues to occupy the Paracel Islands, which Vietnam also claims as its own. Disputes are likely to continue taking the form of China pressurising Vietnam to halt its drilling projects in these waters, as well as disagreements between Vietnamese fishermen and Chinese authorities.

Key Risks:

The potential for renewed maritime dispute with China poses downside risks to Vietnam's otherwise stable short-term political outlook.

Should the Trump administration introduce fresh tariffs on US imports of Vietnamese goods, this would pose a salient risk to Vietnam's export sector, and consequently our economic growth forecast, given the sector's strong orientation to the US economy.

Economic policy slippages could dent investor confidence, and result in a slowdown in foreign direct investment inflows and manufacturing growth.

Table of Contents
Product Code: CFVN_20191001

Table of Contents

Executive Summary

  • Core Views
  • Key Risks
  • Country Risk Summary
  • Economic Risk Index
  • Political Risk Index
  • SWOT
  • Economic - SWOT Analysis
  • Political - SWOT Analysis
  • Economic Outlook
  • Economic Growth Outlook
  • Growth To Remain Under Pressure In 2019
  • GDP By Expenditure Outlook
    • TABLE: GDP GROWTH FORECASTS
    • TABLE: PRIVATE CONSUMPTION FORECASTS
    • TABLE: GOVERNMENT CONSUMPTION FORECASTS
    • TABLE: FIXED INVESTMENT FORECASTS
    • TABLE: NET EXPORTS FORECASTS
  • Outlook On External Position
    • TABLE: MAIN EXPORT AND IMPORT PARTNERS
    • TABLE: MAIN EXPORTS AND IMPORTS
    • TABLE: CAPITAL AND FINANCIAL ACCOUNT BALANCE
    • TABLE: CURRENT ACCOUNT BALANCE FORECASTS
  • Monetary Policy
  • Interest Rates To Remain On Hold Through 2019
  • Monetary Policy Framework
    • TABLE: MONETARY POLICY FORECASTS
  • Fiscal Policy And Public Debt Outlook
  • Fiscal Deficit To Remain Wide On Lower Tariffs And SOE Divestment Delay
  • Structural Fiscal Position
    • TABLE: FISCAL AND PUBLIC DEBT FORECASTS
    • TABLE: MAIN REVENUE AND EXPENDITURE CATEGORIES, 2016
  • Currency Forecast
  • Vietnamese Dong To Remain Steady Over The Near Term
    • TABLE: CURRENCY FORECAST
  • Vietnam Country Risk Q4 2019THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings' Credit Rating. Any comments or data included in the report is solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings' analysts do not share data or information with Fitch Solutions Macro Research.Contents10-Year Forecast
  • The Vietnamese Economy To 2028
  • A New Focus On Quality Growth
    • TABLE: LONG-TERM MACROECONOMIC FORECASTS
  • Political Outlook
  • Domestic Politics
  • Vietnam-China Tensions To Persist In The South China Sea
    • TABLE: POLITICAL OVERVIEW
  • Long-Term Political Outlook
  • Key Political Challenges Over The Coming Decade
  • Operational Risk
    • TABLE: OPERATIONAL RISK
  • Labour Costs
    • TABLE: LABOUR REGULATIONS GOVERNING FLEXIBILITY OF WORKFORCE
  • Legal Environment
    • TABLE: BUREAUCRATIC PROCEDURES
    • TABLE: BUREAUCRATIC BARRIERS
  • Global Macro Outlook
  • Global Growth Deceleration, But Policy Increasingly Supportive
    • TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
    • TABLE: DEVELOPED MARKETS - REAL GDP GROWTH, % y-o-y
    • TABLE: EMERGING MARKETS - REAL GDP GROWTH, % y-o-y
  • Index Tables
    • TABLE: VIETNAM - MACROECONOMIC DATA AND FORECASTS
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