The global economy growth is expected to slow down and much more uncertainty in 2019, however, Vietnam still have some positive signs based on:
Rong Viet Securities
High GDP growth: Vietnam is one of the highest country’s GDP growth globally. According to the General Statistics Office (GSO), Vietnam’s 2018 GDP growth reach 7.08%, much higher than government’s target and consensus expectations. The growth is forecasted to slow down in 2019, reaching 6.7%, however, still higher than the average global GDP growth which will reach 3.54% in 2019 according to OECD.
Many big companies whose factories are located in China, now looking for its subsidiaries due to higher average labor costs in China and trade war effects. Vietnam is in one of those potential countries with strong fundamentals: young population with relatively low labor costs, stable political and government supports on easing policies. In addition, high GDP growth also an important factor to attract foreign investment. A significant example is GoerJek- a Chinese firm assembling Apple’s AirPod announced planning to shift its business to Vietnam.
Related topic: Company registration services in Vietnam
Basel II is expected to apply in Vietnam banks by 2020 due to Circular 41/2016/TT-NHNN. Currently, the SBV approved VCB, VIB and OCB to apply Basel II since 2019. Other 8 banks that potentially could apply in this year are: BIDV, VietinBank, Techcombank, ACB, VPBank, MBB, MaritimeBank and Sacombank. This would strengthen the banks’ capital buffer against risks and add a significant USD-amount collected from these deals to SBV’s FX reserve fund, which help to manage and stabilize the Dong.
FTSE: Vietnam upgrade to Secondary Emerging Market: follow by three countries (Kuwait, China A-share, Saudi Arabia) that added to watch list and then upgrading announcement came right after they met all the criteria, Vietnam is expected to be upgraded to Secondary Emerging Market status in 2020. Although the passive inflows are not that significant (approximately USD300mn), hopefully many funds with restricted mandates that cannot invest in Frontier Market to start putting their money into Vietnam after the upgrade.
Overall, 2019 will be a tough year for PM and investors to make profit globally. Therefore, it is wisely to focus on countries which have high economic growth with good fundamentals. Vietnam, in my view, meets most of the criteria. With the government’s efforts such as signing CPTPP and start applying in January 14,2019, Vietnam would be an attractive destination for seeking money.