Fitch ups Vietnam growth forecast, but warns of bottlenecks

Workers at mechanical components factory in Khai Quang industrial zone, northern Vinh Phuc Province. Photo by Shutterstock/Vietnam Colors.

Fitch Solutions has revised Vietnam’s GDP forecast for 2019 from 6.5 to 6.9 percent, but warns infrastructure bottlenecks can limit growth.

This figure was raised after Vietnam’s real GDP growth (adjusted for inflation) accelerated to 7.3 percent year-on-year in Q3, from 6.6 percent in Q2, driven primarily by stronger growth in the manufacturing sector, said the macro-research firm.

The acceleration in growth was underpinned by the ongoing influx in companies from China amid the U.S.-China war, given that manufacturing continued to outperform other sectors in Q3, Fitch said.

It noted that the manufacturing sector grew by 12 percent year-on-year in Q3, versus 10 percent in Q2, while corresponding growth for the construction sector was 9.7 percent and 9.1 percent respectively.

However, Fitch also noted that the influx of companies from China as a result of the U.S.-China trade war appeared to be putting increasing stress on infrastructure and labor in Vietnam, challenges that could cap growth in the short term.

According to a report by The Wall Street Journal, which cites Agility Global Integrated, a global logistics company headquartered in Kuwait, trucks are having to wait four to five days for unloading a container at the HCMC Port.

Given these factors, Fitch Solutions did not revise its previous 2020 real GDP growth forecast of 6.8 percent.

According to Vietnam’s General Statistics Office, Jan-Sept GDP growth was 6.98 percent, the highest in nine years. The government has targeted a 2019 GDP growth of 6.6-6.8 percent.

By Hung Le / VnExpress