Vietnam stands out as ASEAN trade growth success story: Standard Chartered
Vietnam has shown the strongest trade growth potential in the Association of Southeast Asian Nations (ASEAN), driven by improvements to its trade readiness and economic dynamism, according to the London-based Standard Chartered Bank.
The bank stated in its Trade20 Index, released on October 8, that Vietnam owes its improving strength in trade readiness to infrastructure enhancements and improvements to its ease of doing business score, while its economic dynamism is driven by healthy growth, particularly in terms of export volumes.
As a result, the country is ranked sixth among 20 economies with the greatest potential for trade growth in the Trade20 Index.
According to the study, economic and political reforms in recent decades have spurred Vietnam’s economic growth, bolstered by strong domestic demand and manufacturing-led export success.
The market has solid foundations for growth: it is politically stable, well-located for global supply chains and has a relatively young population.
The study pointed out that the Vietnamese Government has built on these foundations, focusing on business reforms and deregulation, investing in human capital and infrastructure and embracing trade liberalization.
The research also suggested that Vietnam’s growth is likely to be further driven by foreign direct investment (FDI)-led manufacturing and export growth. Rising tourism inflows and stronger domestic demand, supported by higher wages, are also expected to help Vietnam sustain its strong growth.
The Government has entered into a number of free trade agreements, with the latest being the landmark Vietnam-European Union Free Trade Agreement, which is expected to eventually eliminate 99% of all tariffs and open up the public procurement and services markets.
With the ongoing U.S.-China trade tensions, FDI is expected to further flow into the country as global businesses seek alternative low-cost manufacturing destinations.
Therefore, Standard Chartered Bank has forecast that FDI inflows to Vietnam will remain strong this year and the next, at close to US$15 billion.
“Vietnam’s economic openness and integration is paying off. The country has now become the fastest-growing economy in the region, a clear indicator of the benefits the country is reaping from an open economy,” said Nirukt Sapru, CEO Vietnam and ASEAN and South Asia Cluster Markets, Standard Chartered Bank.
He added, “With the Government’s ongoing effort to improve its trade readiness and business environment and continued strong FDI inflows into the country, Vietnam looks set for stronger trade growth.”
Acknowledging the importance of digitization in the future growth of the economy, the Government has put forward plans to digitize 50% of businesses by 2025, with the digital economy then accounting for roughly a quarter of the country’s gross domestic product (GDP).
The bank also forecast that Vietnam is likely to enjoy robust growth in the near term, with its GDP projected to be close to 7%.
Standard Chartered’s Trade20 Index examined 66 economies across the globe and determined each market’s potential for trade growth by analyzing changes across three equally weighted pillars: economic dynamism, trade readiness and export diversity.
While most traditional trade indices are based on a market’s present performance, the study captures changes over time to reveal the markets that have seen the most improvement in the past decade. This reveals the economies where recent positive developments may point to acceleration in trade growth potential.