Good Signs in Economy

 

FDI growth resumes 

According to Macro-Prospect Report of HSBC economic research, purchasing managers index (PMI) in April 2016 increased 52.3 points, the highest in the past 9 months. New products order – important measuring of output, remains stable with increasing employment (highest in the past 11 months) proving the upsurge in business activities. The indexes in April also signalled the rise in Quarter 2, the evidence of continued growth of output in coming months.

 

Experts believe that economic events are fully in conformity with the development. Mr Pham Dinh Thuy, Director of Industrial Statistics Department, General Statistics Office, said that despite recession of production in quarter 1 of 2016, in quarter 2 it is markedly improving with better consumption and lesser stockpile.

 

However, HSBC believed that the resumption of Vietnamese economy does not fully reflect the global economic growth, as it implies more in FDI export growth and increasing FDI attraction in Vietnam.

 

HSBC also predicted that the resumption of Vietnamese economy has proven the success in expanding market share in the context of weakening global market. The success is due to ever-increasing FDI this year.

 

Since the beginning of this year to March, disbursement of FDI increased by US$3.5 billion, 15 per cent more than the same period last year. HSBC predicted that with a series of FDI factories starting operation this year, FDI will help resume the export growth 10.1 per cent more than last year. It also helps economic growth in the conditions of declination in main economic sectors.

 

Beside positive aspects, FDI also caused pressure to local production. According to official statistics, agricultural production in many regions is being seriously affected by drought and salinisation while the mining sector, the main economic support, has decreased its output, and many businesses closed down.

 

According of HSBC research, the economic growth this year will be 6.3 per cent, lower than the target of 6.7 per cent. It is compatible with recent forecast by some international organisations. Recent IMF forecast is even at around 6 per cent.

 

According to the report of the National Financial Supervisory Commission in April and the first 4 months of 2016, only tremendous efforts from the government and businesses could result in attaining the planned growth rate of 6.7 per cent. According to the statistics of the General Statistics Office and assessment of the Commission, the decrease of GDP growth rate, besides overall supply, is affected by cycle development. As short-term growth resumed in quarter 2, 2015, it moved to recess in quarter 3.

 

Though short-term growth is in difficulty, experts believe that the prospect of long-term growth is improving with policies oriented for economic efficiency and high growth rate. Administrative reform and reform in Investment Law and Enterprise Law as well as FTAs, and the TPP, are increasing efficiency, boosting economic growth.

 

Concerning inflation, the National Financial Supervisory Commission said though remaining at low level, it is an increase compared to 2015. The inflation in 2016 will increase 3-4 per cent compared to 2015. The increase is marginal due to advantageous prices of goods in the world and slow increase of demand. In April 2016, CPI increased 1.89 per cent compared to the same period last year, marking the continuous increase in the past 6 months.

 

HSBC believed that the constant increase of CPI is mainly due to inflation in food price, especially with El Nino, and it is a problem for whole region. Therefore CPI may not increase in the future. The inflation in April 2016 is 0.19 per cent against previous month and 1.76 per cent compared with the same period last year. It is regarded as a technical resumption after a low level in March.