Vietnam Third-Quarter Growth Accelerates as Exports Hold UpBloomberg News
Vietnam’s economic growth quickened this quarter as rising foreign investment helped support manufacturing and exports, countering weak lending from a banking industry burdened by bad debt.
Gross domestic product rose 5.54 percent in the third quarter from a year earlier, accelerating from a 5 percent gain in the previous three months, according to data released by the General Statistics Office in Hanoi today. In the nine months through September, the economy grew 5.14 percent, compared with the 5.1 percent median estimate in a Bloomberg survey.
Exports climbed 16 percent in the first nine months of 2013 from a year earlier on sales of electronics and mobile phones, while pledged foreign direct investment rose 20 percent in the first eight months. Overseas demand is helping support an economy that’s been hurt by faltering credit growth, with Fitch Ratings estimating bank bad debt at about 15 percent of loans, the highest among six Southeast Asian countries it covers.
“Export-oriented production is still going along well, particularly in electronics,” said Adam McCarty, a Hanoi-based economist at Mekong Economics. “It’s the state-owned enterprises and the banking sector that keep growth from returning to past levels.”
Prime Minister Nguyen Tan Dung plans to complete a revamp of state enterprises by 2015 and has set up an asset management unit to resolve non-performing loans. The country’s bad debt is also among the highest in the Asia-Pacific region, said Alfred Chan, Singapore-based director of financial institutions at Fitch.
The dong was little changed today at 21,114 per dollar as of 5:10 p.m. in Hanoi. The benchmark VN Index of stocks has gained about 18 percent this year, the biggest advance in Southeast Asia.
“Growth is probably forming a base here,” said Edwin Gutierrez, a London-based portfolio manager at Aberdeen Asset Management Plc, which oversees about $10 billion in emerging-market debt, including Vietnamese bonds. “Credit growth is picking up and may hit the target. We’ve probably passed through the worst already in terms of growth.”
Vietnam in June devalued the dong for the first time since December 2011, and the central bank has cut its refinancing rate eight times since the start of 2012. Still, credit grew 6.5 percent from Jan. 1 to the end of August, according to the monetary authority, lower than a full-year target of 12 percent.
Credit growth is currently about 6 percent, central bank Deputy Governor Nguyen Dong Tien told lawmakers at conference in Hue today. Lending may grow 12 percent to 14 percent in 2014, which will be “suitable” with the government’s goal to control inflation, he said.
Vietnam’s economy expanded 5.25 percent last year, the slowest pace since at least 2005, government data showed. Vietnam’s economy is forecast to grow 5.4 percent this year and 5.8 percent in 2014, according to reports today by the Ministry of Planning and Investment.
“The higher growth figures in past years were neither healthy nor sustainable,” said Jean-Christophe Ganz, Zurich-based chairman of Vietnam Holding Asset Management Ltd., which manages the U.K.-listed Vietnam Holding Ltd. fund. “Growth in coming years will be lower than during that period, but will be more sustainable and based on a sounder economic foundation.”
Inflation in September was the slowest in more than a year. The government aims to contain price gains at 7 percent annually from 2013 to 2015 and then below 5 percent, Vuong Dinh Hue, the Communist Party’s Central Economic Committee chief, said Sept. 23.
Industry and construction, which made up 38 percent of the economy, grew 5.2 percent in the first nine months of the year, today’s data showed. Vietnam’s Ministry of Construction last month issued proposals to ease access to the property market for foreigners, according to U.K.-listed VinaLand Ltd.
A Samsung Electronics Co. unit will start construction on a $1.2 billion chip and electronic components factory in Vietnam next month, the Saigon Times reported Sept. 11.
Services, which accounted for 44 percent of the economy, expanded 6.25 percent in the first nine months. Agriculture, forestry and fisheries, which made up 18 percent of GDP, grew 2.39 percent in the first nine months. Vietnam is the world’s second-biggest exporter of coffee and rice.
— With assistance by Jason Folkmanis