HÀ NỘI — Việt Nam’s economy expanded by 7.1 per cent in 2018, but its increasing openness and reliance on foreign investment suggest it is unlikely to be spared from the global growth slowdown arising from rising trade protectionism and tighter financial conditions.

This conclusion was included in the economic analysis released by Fitch Solutions Macro Research on Wednesday.

According to Fitch, Việt Nam’s real gross domestic product (GDP) grew by 7.3 per cent year-on-year in the fourth quarter of 2018, up from 6.8 per cent in the third quarter. This brought full-year growth for 2018 to 7.1 per cent, marking the fastest pace of expansion in 11 years.

Fitch Solutions said the economy was buoyed by the export-oriented manufacturing sector, which benefitted from strong foreign direct investment (FDI) and global growth.

“Although we believe that Việt Nam’s manufacturing sector and economy will continue to outperform the region over the coming quarters, growth is likely to face headwinds stemming from rising global trade disruptions and tightening financial conditions, which will negatively impact global economic growth and risk sentiment,” Fitch noted in the report.

The report predicted Việt Nam’s real GDP growth will to 6.5 per cent in 2019, in line with the wider trend of slowing global growth.

Việt Nam’s high and growing degree of economic openness will likely see the slowing of global growth momentum act as a drag on the country’s export performance in 2019, following export growth of 13.8 per cent in 2018. Exports accounted for approximately 103 per cent of GDP in 2018, up from just around 84 per cent in 2013.

The research firm also expected the manufacturing sector to remain a key economic driver and to outperform the region. Việt Nam has grown to become a manufacturing powerhouse – particularly in electronics – due to its relatively cheap and large labour force, geographical advantages, attractive tax breaks, stable political environment and open-door trade policies.

“The opening up of the Vietnamese economy also came at an opportune time, as China had begun to shift away from lower-end and export-oriented manufacturing, to focus more on the domestic economy, allowing the former to gain market share,” Fitch added.  — VNS