In its latest report released on July 2, HSBC said Vietnam’s economy could grow only 5.5% this year as it projected earlier due to sluggish domestic demand and other factors. The report did not mention the impact of the East Sea tensions on the country’s economic expansion.
HSBC predicted Vietnam’s economy would expand 5.8% next year. Actually, this growth rate is aimed by the Government for this year and Prime Minister Nguyen Tan Dung at a recent regular cabinet meeting told ministries, agencies and local authorities to do what they can to realize this target and other major macroeconomic goals.
HSBC said in the report that manufacturing and exports remained the bright notes in Vietnam’s economy. Despite the global downturn in the first half of this year, the country’s exports still rose 14.9% in the period.
The resilience of June Purchasing Managers’ Index (PMI) highlights Vietnam’s competitiveness in labor-intensive manufacturing.
Despite sluggish domestic and external demand, the PMI expanded solidly, backed by strong output and new orders. Manufacturing drove GDP growth to 5.5% year-on-year in the second quarter of 2014 from 4.8% in the first quarter.
In a medium term, the initiatives, including the Trans Pacific Partnership (TPP) agreement, should further open up market access and allow Vietnam’s strongest sectors to be competitive on global markets. Labor-intensive manufacturing and agriculture will likely thrive, allowing its people to accumulate capital and invest in more productive technology and move up the value chain.
However, HSBC noted banking, public investment and State-owned enterprise (SOE) reforms are still the missing links to bring Vietnam back on a faster track to over 7% GDP growth.
Despite some achievements, a number of major challenges remain, especially in the domestic-oriented sector.
For SOE reforms, HSBC said the equitization process has certainly been rather circuitous.
The bank said a series of measures had been adopted to facilitate faster equitization and improve management of SOEs, public investment and the banking sector.
The foundation for equitization is being built, but the pace will likely be cautious. The Government will still retain the control of key strategic sectors although its share of total investment should decline.
HSBC said the Government has realized that inefficient public investment, SOEs, and banks are among the hindrances to Vietnam’s rapid industrialization progress, but reforming them quickly is also politically costly.
“From a state perspective, in the short-term, it has a lot to lose, from revenues… to ownership, and not much to gain. Therefore, reforms in Vietnam have been carried out with a two-step forward and one-step backward approach,” it commented.
However, HSBC expects GDP to accelerate in the second half of this year. Domestic demand, although still sluggish in comparison to long-term trends, should see a bounce thanks to faster credit growth and slowly improving consumer sentiment.
Inflation is expected to accelerate marginally from June’s 5% year-on-year in the third quarter on higher energy and social service costs. However, the consumer price index (CPI) would decelerate and end the year at 5.5% year-on-year in 2014.
HSBC said the open market operations (OMO) rate should be steady at 5% for the rest of the year, as subdued domestic demand is no longer an interest rate issue. Since early this year, credit growth has expanded a meager 2.3% in June.
Đăng ký: VietNam News