HSBC optimistic about VN

A report by the lender has pointed out several improving indicators to support its arguments. It said Vietnam’s export performance had been enviable, with an expansion of 14.1 per cent so far this year, a rather impressive result given lacklustre demand across the globe.

Mirroring this trend, the HSBC Manufacturing PMI index has expanded for 12 consecutive months since September 2013. The manufacturing sector grew by 9.8 per cent year-on-year in the last quarter, contributing 1.9 per cent of the economy’s annual 6.4 per cent growth rate.

The bank expected output to continue to expand, reflecting its projection of an annual GDP expansion of 6 per cent for this quarter.

In the short term, it expects the economy to be stable. Inflationary pressures are benign as food supply is ample, domestic demand is sluggish, credit growth low, and oil prices are weak.

It is also noted that domestic firms’ trade deficits have narrowed in recent years, whereas foreign enterprises’ surpluses have picked up, providing stability for the currency and the economy.

HSBC forecasts the consumer price index will continue its downward trend in this quarter, ending the year at 3.7 per cent year-on-year. Meanwhile, nominal credit growth is expected to be lower than 10 per cent this year.

Besides those improvements, there still remain hurdles for further growth. Low linkages with foreign enterprises and persistent skilled labour shortages are currently limiting the benefits of FDI, especially regarding the acquisition of technology, according to the report.

For example, phones and spare parts are now Vietnam’s top export items, making up 15.6 per cent of the country’s total exports in the year to date, which is remarkable considering that in 2010 Vietnam held no share of this market. However, aside from cheap labour, few Vietnamese firms have managed to supply input for the export of handsets.