HANOI, May 2, 2019, The Business Times. The Vietnamese economy is proving resilient, even as regional neighbours swoon. “The growth slowdown is being cushioned by trade and investment diversion,” Maybank Kim Eng economists Linda Liu and Chua Hak Bin have said in a new report, reported The Business Times.
Foreign direct investment (FDI) was up year on year in April amid the US-China trade war, and this trend should stay constructive for growth through all of 2019, they predicted.
“Even if a US-China trade deal is reached in the coming months, multinational corporations planning on new investment will likely adopt a ‘China+1’ strategy to diversify and reduce their vulnerability to any future escalation in trade tensions,” the economists said.
“This is likely to be positive for Vietnam as companies rethink their supply chain strategy and diversify their manufacturing bases from China.”
Along similar lines, Vietnam’s export growth has been positive as well – a far cry from the slump seen by peers such as Singapore and Thailand.
Shipments to the United States grew in March, particularly for textiles, wood products, electronics and other categories hit by US tariffs on Chinese goods.
“This suggests that there may be some diversion of demand and exports to Vietnam due to the US-China trade war,” the Maybank Kim Eng economists said. “With the US and China appear to be closing in on a trade deal, exports to China also rebounded.”
They reaffirmed their call for full-year gross domestic product (GDP) growth of 6.8 per cent.
But they warned that risks still include weaker-than-expected exports, while a domestic crackdown on corruption could also put the crimp on infrastructure investment and land sales.