New trading era kicks off

Vietnam set for growth, with more investors expected

Vietnam is expected to benefit from the Asean Economic Community and the Trans-Pacific Partnership.
Vietnam is expected to benefit from the Asean Economic Community and the Trans-Pacific Partnership.PHOTO: REUTERS

The establishment of the Asean Economic Community means growth prospects for the new common market of 625 million people have never looked better. Rupali Karekar looks at what 2016 may have in store for five of the biggest economies of the 10-member bloc.

Last year ended on a good note for Vietnam, with economic growth quickening in the fourth quarter because of rising industrial output and record-high foreign investment.

There are expectations that this year could be as good or better.

Economists say Vietnam's attractiveness as an investment destination is set to only grow, burnished by its relative political stability, cheap labour and a growing middle class.

"The country boasts many of the qualities which gave rise to China's extremely fast-paced development from the early 2000s onwards," BMI Research analyst Andrew Wood said. "We forecast real GDP (gross domestic product) growth to accelerate to 6.6 per cent."

Vietnam businesses have mainly been fuelled by the country's strong orientation towards the United States, Japan and the European Union. Trade within the region is only 20 per cent for most small and medium-sized enterprises.

But that may change this year as the Asean Economic Community will give them more opportunities.

The Trans-Pacific Partnership is also expected to greatly benefit Vietnam, Bank of America Merrill Lynch economists said in a report.

Prime Minister Nguyen Tan Dung set a GDP target of 6.7 per cent for this year.

The central bank's move to weaken the dong three times last year after China's yuan depreciation may perhaps have been a sour note in Vietnam's story.

Economists expect the State Bank of Vietnam to further devalue the currency.

A version of this article appeared in the print edition of The Straits Times on January 06, 2016, with the headline 'Vietnam set for growth, with more investors expected'. Print Edition | Subscribe