Vietnam economy in 2017

 

GDP in 2017 realized an impressive growth of 6.81% YoY. The growth rate this year exceeded the original target of 6.7% and forecasts of international and domestic experts, and was the highest annual growth posts during 2011-2017. High growth accompanied low inflation (3.53% YoY on average – and basic inflation remained below 2%, at 1.7% in 2017 specifically) and a stable currency, with foreign reserves soaring to the record height of $52 bn USD, thanks to strong growth in exports, remittances, foreign investment inflows, especially foreign portfolio capital into state divestment deal like Saigon Beer Alcohol Beverage Corporation (SAB – HOSE).

 

 

 

The scale of the economy in 2017 at current prices reached VND 5,007.9 quadrillion; GDP per capita is estimated at VND 53.5 million, equivalent to $2,385 USD, up $170 over 2016. For GDP by expenditure, final consumption increased by 7.35% YoY (real growth for retail sales at 9.46% YoY, much higher than last year level of 8.33% YoY). Growth in capital formation even posted higher, at 9.8% YoY. Trade balance achieved a surplus of $ 2.67 billion, with import-export turnover increasing sharply by 21.5% against 2016.

 

Most economic sectors play was key to this year’s GDP growth. Among sectors, one the more notable achievements is the strong growth of the industrial sector, up 7.85% YoY, and higher than the 7.06% YoY achieved during 2016. The manufacturing industry is another bright spot, with an increase of 14.4% YoY, the highest in seven years, with Samsung and Formosa being the major drivers. Agriculture, forestry and fisheries also recovered 2.9 percent from a record low last year. Service sector, which is the largest economic sector, grew at 7.44% with the two leading wholesale and retail and financial and banking sectors. The tourism industry also emerged strongly with 2017 international visitors to Vietnam increased 30% YoY, reaching 13 million visitors and aircraft tourists reached 8.9 million, increasing 31% compared to the same period last year.


The state budget is improving with the rate of public debt tending to decrease and the ratio of public debt over GDP decreasing. The budget deficit to GDP ratio is decreasing, with the recurrent expenditure decreasing. The growth of public investment has been the slowest since 2015 as a result of the government’s ongoing public investment reforms and prudent investment policies.


Foreign direct investment (FDI) and foreign direct investment (FII) are on the rise, respectively 44.4% and 45.1% over the same period. Disbursed FDI increased at a record level in the past 10 years, showing the attractiveness of the Vietnamese market to international investors.

 

 

 

In 2017, there was also a record increase in the number of newly established enterprises and a sharp increase in the proportion of profitable enterprises in comparison with previous years. The government actively equitized state-owned enterprises (SOEs) and divested capital from joint ventures, with the outstanding deals where the State Capital Investment Corporation (SCIC) withdrew capital from Vinamilk and the Ministry of Industry and Trade divested at Saigon Beer Alcohol Beverage Corporation (SAB – HOSE). The value of state capital being withdrawn in 2017 is 6.34 times that of 2016.


Strong economic growth is attributable to the strong growth in credit from the beginning of the year, offsetting the delay in disbursement of public investment. Credit growth is estimated at 18.17% YoY in 2017, with credit focusing more on business than before, supporting the improvement of sectors of real economy. Consumer credit continued to increase and the trend of people moving from cash payments to bank payments continued to increase.


The banking system actively handles bad debt in 2017 in various forms including debt sale, secured asset auction, using provision for debt write-offs, etc. The support of policies such as Resolution 42/2017/QH14 and Decision 1058/QD-TTg helped speed up the process of bad debt resoultion. A number of banks have completed the provisioning for the bonds issued by the Asset Management Corporation (VAMC) and reduced their NPLs to the lowest level in many years. Despite the high cost of provisioning, the banking sector recorded an increase of over 40% in net profit over the previous year, contributing significantly to overall GDP growth.


Vietnam's business environment has improved markedly. The World Economic Forum ranked Vietnam's competitiveness up 5 levels to 55/137 while the World Bank ranked Vietnam's business environment up 14 levels, to 68/90 of countries and territories. Vietnam's sustainable development index in 2017 also increased 20 levels to 68/157 of countries and territories.