Illustrative image (Photo: VNA) Hanoi (VNS/VNA) - Fitch Solutions have revised up its 2020 real GDPgrowth forecast for Vietnam slightly to 3 percent, from 2.8 percent previously.
Vietnam’s real GDP was reported to grow by 0.4 percent year-on-year (y-o-y) inthe second quarter of this year, its weakest since the series began in 2000,mainly due to a sharp slowdown in manufacturing growth and a contraction inservices.
“Given that Vietnam appears to have contained the COVID-19 outbreakdomestically, we expect manufacturing and services growth to stage a recoveryover the second half of 2020,” the ratings agency said in a report released on July1.
That said, the extent of recovery in manufacturing will be capped by weakexternal demand in a global recession, while a controlled reopening of bordersonly to ‘foreign experts, high-level workers and investors’, according to thePrime Minister on June 25, will continue to hamper a recovery intourism-related services such as retail, accommodation and catering, andtransport.
“We expect growth of the industrial and construction sector, which account forabout 35 percent of GDP, to recover somewhat over H2 2020. Growth of theindustrial sector slowed significantly in Q2 2020 to 0.7 percent y-o-y, from5.1 percent y-o-y in Q1 2020."
According to reports from the General Statistics Office, the output of theextractive sector contracted by 6.4 percent y-o-y in Q2 2020, extending its declinefrom 4.2 percent y-o-y in Q1 2020, and Fitch expected the y-o-y contraction tocontinue over the coming quarters as the ongoing low oil price environment wasmaking exports unprofitable for PetroVietnam.
Growth of manufacturing, the largest sub-sector at 17 percent of GDP, slowed to3.2 percent y-o-y, from 7.1 percent y-o-y in Q120, as activity stalled due toViet Nam’s movement restrictions in April. With Vietnam’s restrictions havingbeen lifted, Fitch expected manufacturing growth to recover over the secondhalf of the year.
“Indeed, industrial production growth trends already indicate a sharp recoveryunderway and we expect this to be sustained over H2 2020. In particular, weexpect the EU-Vietnam Free Trade Agreement, which will come into effect inAugust 2020, to deliver a boost to export manufacturing activity,” Fitch said,adding that Vietnam’s manufacturing sector will also gradually receive supportfrom companies relocating from China and around the region. That said, weakenedexternal demand amid a global recession will cap the extent of Vietnam’smanufacturing activity rebound.
Construction growth remained steady at 4.6 percent y-o-y in Q2 2020, versus 4.2percent y-o-y in Q1 2020 and Fitch expected a ramping up of the Government’spublic infrastructure drive to aid the sector over H2 2020.
Fitch expected services (42 percent of GDP) growth to also recover somewhatover H2 2020.
It noted, income losses due to the COVID-19 economic shock will also seeconsumers tighten their purse strings, which would also hamper a recovery intourism-related sub-sectors, such as retail, hospitality, and transport andwarehousing services.
However, that said, an increase in domestic tourism in light of ongoinglimitations on international leisure travel and consumer worries of contagionin the absence of a COVID-19 vaccine should help to cushion the loss inbusiness for these sectors.
“Real estate services (5 percent of GDP) will likely also remain under pressureamid a challenging retail outlook, although we believe that Vietnam re-allowingbusiness travellers and investors should deliver some support to thissub-sector.”/.
Vietnam’s real GDP was reported to grow by 0.4 percent year-on-year (y-o-y) inthe second quarter of this year, its weakest since the series began in 2000,mainly due to a sharp slowdown in manufacturing growth and a contraction inservices.
“Given that Vietnam appears to have contained the COVID-19 outbreakdomestically, we expect manufacturing and services growth to stage a recoveryover the second half of 2020,” the ratings agency said in a report released on July1.
That said, the extent of recovery in manufacturing will be capped by weakexternal demand in a global recession, while a controlled reopening of bordersonly to ‘foreign experts, high-level workers and investors’, according to thePrime Minister on June 25, will continue to hamper a recovery intourism-related services such as retail, accommodation and catering, andtransport.
“We expect growth of the industrial and construction sector, which account forabout 35 percent of GDP, to recover somewhat over H2 2020. Growth of theindustrial sector slowed significantly in Q2 2020 to 0.7 percent y-o-y, from5.1 percent y-o-y in Q1 2020."
According to reports from the General Statistics Office, the output of theextractive sector contracted by 6.4 percent y-o-y in Q2 2020, extending its declinefrom 4.2 percent y-o-y in Q1 2020, and Fitch expected the y-o-y contraction tocontinue over the coming quarters as the ongoing low oil price environment wasmaking exports unprofitable for PetroVietnam.
Growth of manufacturing, the largest sub-sector at 17 percent of GDP, slowed to3.2 percent y-o-y, from 7.1 percent y-o-y in Q120, as activity stalled due toViet Nam’s movement restrictions in April. With Vietnam’s restrictions havingbeen lifted, Fitch expected manufacturing growth to recover over the secondhalf of the year.
“Indeed, industrial production growth trends already indicate a sharp recoveryunderway and we expect this to be sustained over H2 2020. In particular, weexpect the EU-Vietnam Free Trade Agreement, which will come into effect inAugust 2020, to deliver a boost to export manufacturing activity,” Fitch said,adding that Vietnam’s manufacturing sector will also gradually receive supportfrom companies relocating from China and around the region. That said, weakenedexternal demand amid a global recession will cap the extent of Vietnam’smanufacturing activity rebound.
Construction growth remained steady at 4.6 percent y-o-y in Q2 2020, versus 4.2percent y-o-y in Q1 2020 and Fitch expected a ramping up of the Government’spublic infrastructure drive to aid the sector over H2 2020.
Fitch expected services (42 percent of GDP) growth to also recover somewhatover H2 2020.
It noted, income losses due to the COVID-19 economic shock will also seeconsumers tighten their purse strings, which would also hamper a recovery intourism-related sub-sectors, such as retail, hospitality, and transport andwarehousing services.
However, that said, an increase in domestic tourism in light of ongoinglimitations on international leisure travel and consumer worries of contagionin the absence of a COVID-19 vaccine should help to cushion the loss inbusiness for these sectors.
“Real estate services (5 percent of GDP) will likely also remain under pressureamid a challenging retail outlook, although we believe that Vietnam re-allowingbusiness travellers and investors should deliver some support to thissub-sector.”/.
VNA
