Vietnam economy continues to strengthen, reports VDSC

18-Dec-2020 Intellasia | HanoiTimes | 6:02 AM Print This Post

Optimism for the year ahead has been improved to the highest thanks to the country’s effective control of Covid-19 pandemic.

Strong growth on both the supply and demand sides ensures the economy strengthens into the final month of the year, according to Viet Dragon Securities Company (VDSC).

On the supply-side, industrial production registered strong growth in November (+3.9 percent month-on-month and +9.2 percent year-on-year), led by a robust growth of the manufacturing sector (+11.9 percent year-on-year). A 125 percent surge in refinery petroleum production has contributed significantly to the manufacturing growth figure.

The Vietnam Manufacturing Purchasing managers’ Index (PMI) dipped fractionally below the 50.0 no-change mark to 49.9 in November.

“However, despite this setback, optimism for the year ahead continued to improve to the highest since July 2019 as the Covid-19 pandemic remains under control,” noted the VDSC in its latest report.

On the demand-side, retail sales expanded further by 8.5 percent year-on-year in November from 6.1 percent in the prevous month. Daily consumer goods continued to see robust growth with retail sales of goods growing at 13.2 percent year-on-year.

Online sales during the end of the year holiday season also supported the improvement of domestic consumption. Non-essential goods such as automobiles continued to register strong growth of 22.0 percent year-on-year in November compared to the 15 percent growth in October, which VDSC pointed out as a positive note.

On the other hand, other sub-sectors of the retail industry remained subdued as hospitality and tourism still recorded negative growth rates.

Trade surplus narrowed due to surging imports

In November 2020, exports continued to rise by 10.7 percent year-on-year, led by a strong growth of personal computers, electrical products and spare parts (+17.7 percent year-on-year) and machinery products (+61.8 percent year-on-year).

For the 11 months of 2020, exports of personal computers and related products rose strongly by 24.3 percent year-on-year as the world shifts to remote working. Meanwhile, relocation of manufacturing from China to Vietnam boosted exports of machinery products by 45.2 percent year-on-year in the January November period. Total exports turnover during this period rose by 5.5 percent year-on-year to around $254.9 billion.

November also marked the first month that imports growth surpassed exports growth in 2020. Imports increased for the fourth consecutive month by 15.7 percent year-on-year, led by imports of intermediate goods (+32.1 percent year-on-year) and capital goods (+5.2 percent year-on-year).

The trade surplus in November is estimated at $754 million, the lowest level since April. A strong gain in November also lifted imports growth into positive territory (+1.7 percent year-on-year) and total imports turnover reached $234.8 billion in the January November period. The trade surplus continued to expand to $20.1 billion for the first 11 months of 2020, nearly doubled the reported figure in the same period of last year.

Credit growth expanded faster towards end of the year

As of end-Sep 2020, credit growth was up only 6.1 percent year-to-date due to weak borrowing demand triggered by the pandemic. However, there has been a significant improvement in lending activities during the past two months. According to the State Bank of Vietnam (SBV), credit growth has accelerated to 8.5 percent year-to-date as of November 27, 2020, bringing total loans to VND8,900 trillion (US$384.7 billion).

Regarding to the result of Circular 01/2020/TT-NHNN, as of November 9, credit institutions have rescheduled the repayment terms for more than 272,183 customers with a loan balance of VND341.8 trillion (US$14.77 billion), equivalent to 3.8 percent of total loans. In addition, credit institutions also exempted/reduced interest payment for 552,725 customers with a loan balance of VND931 trillion (US$40.24 billion). New lending with preferential interest rates was estimated at VND2,018 trillion (US$87.23 billion), or 23 percent of total loans.

Despite of a faster-than-expected recovery in credit demand, liquidity conditions remained ample, stated the VDSC.

In the interbank market, the overnight rate stayed at 0.1 percent in November. Meanwhile, government bond yields continued to decline. Yields on bonds with a 5-year maturity dropped 14 basic points while yields on bonds with tenors of 10 years and 15 years declined by 15 and 19 basic points, respectively.

The yield spread between the 2-year and 10-year tenors narrowed from 221 to 207 basic points during November.

Due to an acceleration of credit growth in recent months, Vietnam’s credit growth for the whole year is estimated to be around 10 percent year-on-year, which is lower than an increase of 13.6 percent in 2019, stated the VDSC.

“A strong recovery of credit demand will help to mitigate risks of rising bad debts for Vietnam’s banking system,” it noted.


Category: Economy, Vietnam

Print This Post

Comments are closed.