Vietnam is considered a “Bright Star” in ASEAN with its economic growth rate maintained at a high level over the past years despite global fluctuations by resilience despite global challenges, with positive growth forecast for 2024, increasing FDI, and a record trade surplus contributing to economic stability.
With its growth rate maintained for many consecutive years, despite Covid-19 and the global economic recession, Vietnam is greatly appreciated by international investors for its economic prospects within ASEAN.
At an information session prior to the upcoming regional UOB conference entitled “Gateway to ASEAN” in Ho Chi Minh City on September 6, Mr. Suan Teck Kin, Head of Research at UOB, expressed his appreciation of the region’s economic and trade potential, in which Vietnam stands out as an important destination with positive prospects in the future.
ASEAN emerging stronger
Amid volatile markets and global uncertainty, ASEAN has weathered the risk of recession, with growth remaining robust and inflation significantly lower than in the G3 economies. Despite a host of macro-economic challenges, from a slowing global economy and rising inflation to volatile commodity prices and geopolitical tensions, the Asian Development Bank (ADB) forecasts ASEAN’s growth at 5 per cent in 2024; a level it has maintained over the past decade.
There are many factors driving ASEAN’s rise, not only its demographic advantage, including a growing young population of nearly 700 million and an expanding middle class, but also its geographical location at the crossroads of major trade routes and $3.4 trillion in global trade each year.
“In terms of trade, ASEAN is a major trading bloc, but most trade takes place outside of the region,” said Mr. Suan. “In 2022, ASEAN’s trade reached about $3.8 trillion, of which 80 per cent was with non-ASEAN countries. In contrast, the EU has a higher share of intra-bloc trade, at 80 per cent, showing that ASEAN trade is globally integrated, especially with large economies such as China and the US.”
He also pointed out that the shift in US trade flows has given an advantage to ASEAN. In 2016, about 21 per cent of US imports came from China, which has now fallen to 13 per cent, while imports from ASEAN have increased from 7 per cent to about 11 per cent. Vietnam has seen significant growth, with its share of US imports nearly doubling.
Another driver is the shift in Chinese trade flows away from the US and Europe, which has also benefited ASEAN. ASEAN has become China’s largest trading partner, surpassing the EU and the US. While China’s trade with ASEAN has increased significantly, its trade with the US and the EU has declined. This reflects a broader shift towards closer economic ties between China and Southeast Asia.
Overall, these trends illustrate a significant restructuring of global trade, with ASEAN emerging as a more prominent player in global supply chains due to the shift away from China and increasing regional and global integration.
Vietnam: A bright star in the regional landscape
Vietnam is considered a “Bright Star” in ASEAN with its economic growth rate maintained at a high level over the past years despite global fluctuations.
Vietnam’s economy shows resilience despite global challenges, with positive growth forecast for 2024, increasing FDI, and a record trade surplus contributing to economic stability.
Data from the General Statistics Office shows that Vietnam’s GDP growth in the second quarter of 2024 was 6.93 per cent, exceeding expectations for 2024 as a whole, which is forecast at 6 per cent, and higher than the 5.87 per cent posted in the first quarter of 2024 and 6.72 per cent in the fourth quarter of 2023.
Overall economic growth is supported by strong manufacturing activity as well as the recovery of the trade sector. Both the manufacturing and service sectors have grown strongly in the past two quarters. The manufacturing sector grew 10 per cent year-on-year in the second quarter of this year from 7.2 per cent in the first, while the services sector grew 7.1 per cent year-on-year in the second quarter from 6.2 per cent in the first. The recovery in both sectors is important, as they collectively account for three-quarters of Vietnam’s GDP.
In addition, foreign trade remained strong in the first half of 2024, and momentum in semiconductor sales since mid-2023 is likely to continue in the second half. Exports and imports increased 14.0 per cent and 16.6 per cent year-on-year, respectively, in the first half.
FDI into Vietnam remains strong, reaching record highs for the second consecutive year. In the first seven months of this year alone, Vietnam disbursed $13 billion in FDI, with strong investment coming from countries such as Singapore, China, Hong Kong (China), and Japan. “This positive trend demonstrates the continued confidence of investors and businesses in Vietnam’s competitiveness and potential,” said Mr. Suan.
Despite the remaining downside risks, including external geopolitical risks, volatility in the semiconductor cycle, and uncertainty over China’s economic recovery, international institutions such as UOB, the ADB, the International Monetary Fund (IMF), and the World Bank (WB) still forecast positive growth for Vietnam, of 6.0-6.5 per cent for FY 2024, recovering from 5.0 per cent in FY 2023. This would make Vietnam one of the fastest-growing economies in ASEAN.
Over the longer term, Vietnam’s strong economic growth is supported by positive long-term demographic and macro-economic trends. This has allowed Vietnam to become the rising economic star of ASEAN, according to Mr. Suan.
In terms of positive long-term demographic trends, Vietnam has a strong and expanding middle class and the third-largest population in ASEAN, at about 100 million. This sets it up in the years ahead for more consumer spending as the population continues to grow and becomes wealthier.
In terms of macro-economic trends, Vietnam is successfully transitioning away from lower-cost manufacturing toward higher value-added technologies, as well as placing a stronger focus on the services, retail, and tourism industries. As a result of these healthy long-term fundamentals, Vietnam’s economic share of ASEAN’s total GDP has grown handily, almost doubling from less than 6 per cent in 2000 to about 12 per cent now.
To discuss in more detail about growth and investment opportunities for companies and investors in ASEAN and Vietnam, UOB will organize the annual “Gateway to ASEAN” conference, with the theme “ASEAN: Crossroad to The World”, on September 6 at the Thisky Hall Sala Convention Center, 5th floor, Grand Skylar, in Ho Chi Minh City. This is the first year the conference has been held in Vietnam.
It is expected to bring together leaders of ministries and agencies in Vietnam and leading enterprises in the region. As a bank with the most extensive trade network in ASEAN, UOB plays a role in connecting and promoting sustainable development in the region. Leveraging its extensive regional network and deep local understanding, UOB is committed to providing comprehensive financial solutions and support to help businesses seize growth opportunities in this dynamic economic region.
Source: VnEconomy