Vietnam GDP at 11-year high, inflation under control

HANOI - The VN-Index ended a volatile year on a negative note amid cautious market sentiment, plunging to 892.54 points at year-end, down 3.7% month-on-month and 9.3% on-year in local currency. Similarly, the HNX-Index tumbled 10.8% YoY to wrap up 2018 at 104.23 points, down 0.6% in December.

Biggest losses were witnessed from large-cap stocks across banking, consumer, oil & gas, and real estate sectors.

However, market liquidity soared inn2018, with combined average daily trading value (HSX, HNX, UPCoM) improving to USD296.4 million from USD223 million in 2017.

Aggregate market capitalisation of the HSX, HNX, and UPCoM also moved up to approximately USD170 billion at year-end, a gain of 12.7% YoY, primarily due to several listings of big enterprises.

Net foreign inflows stayed strong in 2018, totaling USD1.9 billion.

Vietnam's economy expanded at 7.31% YoY in Q4 of 2018, leading to full-year GDP growth of 7.08%, the fastest pace in 11 years.

The industry and construction sector grew 8.8% YoY, of which the manufacturing and processing sub-sector remained a bright spot, surging 12.98% YoY.

December's PMI reached 53.8, in line with the 2018 average, the highest since 2011. It also marked 37 consecutive months of steady expansion of the manufacturing sector.

Real retail sales advanced 9.4% YoY, thanks considerably to a sharp increase of 20% YoY in international tourist arrivals in 2018 to 15.5 million.

On trade front, Vietnam recorded a surplus of USD7.2 billion for 2018, driven by both exports (USD244.72 billion, up 13.8% YoY) and imports (USD237.51 billion, up 11.5% YoY), with the U.S. remaining Vietnam's largest export market in 2018.

Total registered foreign investment in 2018 slid slightly by 1.2% YoY to USD35.46 billion, while FDI disbursement hit USD19.1 billion, up 9.1% YoY.

In regard to inflation, December's CPI edged down 0.25% MoM with average CPI for the full year at 3.54% YoY, well below the Government's target of 4%.

Vietnam Asset Management (VAM) describes 2018 in Vietnam as "a rather slow year" for privatisation.

"Regarding SOE equitisation, while the Government ideally set out a target to complete at least 85 SOEs this year (21 from the 2017 plan and 64 from the 2018 plan), the actual number of equitised SOEs as of December 2018 was only 12," VAM says.

And while 181 SOEs were planned to undergo the divestment process in 2018, the State divested capital from only 18 (16 from the 2017 plan, only 2 from the 2018 plan).

"On the positive side, the process for SOE reform going forward is expected to accelerate with a newly-established Government authority - the Commission for the Management of State Capital at Enterprises (CMSC), which directly represents State ownership of 19 economic groups and state corporations," VAM says.

Commenting on prospects for 2019, VAM says:

"Fundamentally, Vietnam's strong economic expansion is forecast to continue, with GDP growth at 6.6% - 6.8%. Inflation is targetted at around 4%.

"Stability of the currency (dong) will be maintained in a similar manner to 2018 (depreciated about 2.8% against USD in rates listed at commercial banks) on the back of Vietnam's healthy foreign reserves, thanks to influx of the greenbacks from the trade surplus, FDI and remittances (Vietnam was among the top 10 remittance receivers in the world in 2018, with almost USD16 billion).

"Vietnam has also become an increasingly attractive alternative for foreign manufacturers to relocate their production bases amid the ongoing US-China trade war."  www.vietnamam.com (ATI).