The growth was mainly driven by agriculture, forestry and fishery, industry and construction, and services.
Vietnam’s economy grew more than analysts had expected in Q1 2019, with the General Statistics Office reporting gross domestic product (GDP) to have expanded at 6.8% YoY, according to UOB Global Economics & Markets Research. Whilst it was below the 7.3% increase seen in Q4 2018, it was above the Bloomberg median forecast of 6.5%.
In the first quarter, the country’s GDP was mainly driven by agriculture, forestry and fishery (2.7% YoY), industry and construction (8.6% YoY), and services (6.5% YoY), particularly wholesale and retail, transport, banking and finance, education and healthcare.
Foreign direct investment (FDI) and manufacturing production remained significant growth drivers, UOB’s analyst Manop Udomkerdmongkol.
“According to the Foreign Investment Agency, disbursed FDI picked up 9.8% YoY to a three-year high of $2.6b in the first two months of 2019. Meanwhile, manufacturing production increased by 12.4% YoY, compared with 13% YoY in the previous quarter,” he said.
Vietnam’s economy is expected to expand robustly at a 6.7% pace in 2019, slightly below 2018’s 7.1%, driven by continued strength in domestic demand. The National Assembly is expected to spend around $17.9b for development projects in 2019, of which 88% will come from domestic capital and 12% from foreign sources.
Industrial production is expected to be boosted by the continued opening of new multinational enterprises in labor-intensive, export-oriented manufacturing and processing industries.
“However, unfavorable weather conditions could undermine agricultural output and mining production. The US-China trade dispute could also have a negative impact on Vietnam’s merchandize exports in the near term although Vietnam’s participation in various free trade agreements should support continued access to foreign markets for major exports,” Udomkerdmongkol noted.
In terms of monetary policy, the State Bank of Vietnam (SBV) is expected to maintain the refinancing rate at 6.25% until June 2020. At the current policy rate, the monetary policy stance remains conducive to the continuation of economic growth. The strong GDP growth eases pressure on the central bank to add more stimuli to achieve the annual growth target of 6.7%. Hence, another policy rate cut may not be on the cards at the SBV in 2019.