ANZ economists raise Viet Nam's GDP forecast

A banking transaction is carried out. ANZ Bank economists say there is sufficient room for loosening monetary conditions in 2015. Photo vcci.com.vn

In a report dated March 13, ANZ economists for ASEAN and the Pacific, Glenn Maguire and Eugenia Victorino, said support from external demand continues to be robust and various indicators are pointing to a recovery in domestic demand.

A steeper-than-expected pull back in inflation had led experts to revise their inflation forecasts to 2.6 per cent in 2015 and 3.8 per cent in 2016, lower than the previously anticipated 3.0 per cent and 4.5 per cent, respectively.

"With a subdued inflation outlook, we see sufficient room for the central bank to further loosen monetary conditions in 2015 as growth is still below potential," they said.

The economists estimated that industrial production growth over the first two months of this year is 14.2 per cent, up from 5.6 per cent from a year ago. This is the fastest annual gain since 2012, when this series was re-based.

Domestic investment was also slowly gaining traction, as the construction sector was expected to rise 8.8 per cent during the last fourth quarter, pushing up the 2014 sector growth to 6.3 per cent year-on-year–the fastest growth rate since 2011.

Retail sales growth averaged 14.5 per cent year-on-year during the first two months of 2015, and the real average was 13.7 per cent in light of weak inflation. This is also the fastest rise in retail sales in five years.

External trade is still expected to post strong growth, although the trade surplus might narrow in 2015. The trade deficit had narrowed during the first two months to US$61 million as exports reported an expansion of 7.8 per cent year-on-year, while imports rose 15.1 per cent year-on-year over the same period.

The newly registered foreign direct investment (FDI) had touched $712 million as of February. Up to $600 million of this amount was channelled into the manufacturing sector, promising a boost for domestic productivity in the long run.

"We now expect local consumption to remain on its path to recovery. Further, as Viet Nam remains a manufacturing FDI magnet, we see a further upside on external trade as the country continues to transform its production possibility frontier," the economists said.