HA NOI — Viet Nam is expected to be among the top three rapid growth markets in the Asia-Pacific region next year, according to Ernst&Young's quarterly Rapid Growth Markets (RGM) Forecast released last week.
The forecast stated that Asia-Pacific RGM star performers next year are expected to be India (+8.5 per cent), mainland China and Hong Kong (+8.6 per cent) and Viet Nam (+7.1 per cent).
RGMs are expected to grow collectively at 5.3 per cent this year, bouncing back to 6.3 per cent in 2013.
After gaining last year's growth of 5.9 per cent - slightly better than expected given the budget cuts and interest rate rises made necessary by above target inflation - the forecast said there will be little change for Viet Nam this year, as European markets stay weak in the first half of the year and continued inflation slows relaxation of monetary policy.
The country's exports rose more strongly than forecast last year but rapid import growth meant that devaluation of the Vietnamese dong did more to prolong inflation than to narrow the trade gap. This will strengthen official determination to slow the depreciation of the dong in 2012-13. An ongoing requirement to expand foreign reserves in line with import needs will also restrain the speed at which interest rates can fall.
"The central bank is working toward more targeted credit growth curbs and better restraints on borrowing for speculative investment," the forecast stated.
According to the forecast, although Viet Nam's growth should recover above the medium-term target of 6.5 per cent as the EU crisis abates, risks to near-term growth remain mostly on the downside. The weakness of the dong could return if progress on reducing inflation and the trade and fiscal deficits is less than forecast, and regional security concerns could also hit investor confidence.
The forecast also said that companies alert to rising cost factors in China could very usefully look at Viet Nam, Mexico and African countries as alternative producers of low-cost manufacturing. A 12 per cent annual rise in wage costs in China's coastal cities will gradually make itself felt elsewhere in the country.
Gerard Dalbosco, managing partner, Markets, Asia Pacific at Ernst&Young, said growth prospects in the RGMs remain strong but in positioning themselves, companies may have to examine a greater number of variables than in the past, encompassing transport, information and communication technology infrastructure.
Additional considerations include wages and other production costs, trade liberalisation policies, currencies management, technology transfers, investment and manufacturing partnerships, merger and acquisition opportunities, the quality of financial services and government procurement policies.
The quarterly Ernst&Young Rapid-Growth Markets Forecast, which is co-produced with Oxford Economics, aims to fulfil the need for practical and accessible economic forecasts and insights on the development of 25 rapid-growth countries around the world. — VNS