ADB raises Vietnam’s growth forecast to 6.9% this year
While trimming its forecasts for economic growth in developing Asia this year and next given the slower growth in China and India, the Asian Development Bank (ADB) has raised Vietnam’s growth forecast to 6.9% for 2019 and 6.8% for 2020.
In a supplement to its Asian Development Outlook 2019 Update released in September, ADB expects gross domestic product (GDP) in the region to expand 5.2% in both 2019 and 2020, down from the September forecast of 5.4% growth this year and 5.5% next year.
In Vietnam, GDP growth in the first three quarters of 2019 accelerated to 7%, the highest rate over the same period in nine years. Private consumption rose by 7.3% and investment expanded by 7.7%, boosted by an improved business environment, continued investor confidence and increased foreign direct investment.
With unexpectedly strong growth momentum in the third quarter likely to carry over into the fourth quarter and next year, the growth forecast for Vietnam has been raised from 6.8% to 6.9% for 2019 and from 6.7% to 6.8% for 2020.
“While growth rates are still solid in developing Asia, persistent trade tensions have taken a toll on the region and are still the greatest risk to the longer-term economic outlook. Domestic investment is also weakening in many countries, as business sentiment has declined,” said ADB chief economist Yasuyuki Sawada.
“Inflation, on the other hand, is ticking up on the back of higher food prices, as African swine fever has raised pork prices significantly,” Sawada noted.
The supplement forecasts inflation of 2.8% in 2019 and 3.1% in 2020, up from the September prediction that prices would rise by 2.7% this year and next.
In East Asia, growth in China is now expected at 6.1% this year and 5.8% next year due to trade tensions and a slowdown in global activity coupled with weaker domestic demand, with family wallets being hit by pork prices that have doubled relative to a year ago.
Growth could accelerate, however, should the United States and China come to an agreement on trade, the report stated. In September, ADB forecast GDP growth of 6.2% in 2019 and 6.0% in 2020.
Hong Kong, China, already in technical recession, will see severe downward pressures persist possibly into 2020. The economy is now expected to contract 1.2% this year and grow 0.3% next year.
In South Asia, India’s growth is now seen at a slower 5.1% in fiscal 2019 as the collapse of a major nonbanking financial company in 2018 led to a rise in risk aversion in the financial sector and a credit crunch.
Also, consumption was affected by slow job growth and rural distress aggravated by a poor harvest. Growth should pick up to 6.5% in fiscal year 2020 with supportive policies. In September, ADB forecast India’s GDP would grow by 6.5% in 2019 and 7.2% in 2020.
In Southeast Asia, many countries are seeing continued export declines and weaker investment, and growth forecasts have been downgraded for Singapore and Thailand.
GDP growth is expected to slow in the Pacific, with activity in Fiji, the subregion’s second largest economy after Papua New Guinea, expected to be more subdued than previously anticipated.