Vietnam’s economy accelerated for a second straight quarter on the back of stronger performances by its key growth drivers — manufacturing and exports.
Gross domestic product increased 5.33% from a year ago in the three months ending September, compared with a 5% median estimate in a Bloomberg survey and a revised 4.05% expansion in the previous quarter. Trade data released by the General Statistics Office also on Friday showed exports returned to growth in September, snapping six months of declines.
“The economy continues its improving trend with increases seen more clearly in many sectors,” said Nguyen Thi Huong, director at GSO, as she attributed the gains to government steps to support businesses. Still, there’s a “need to push further,” especially to boost domestic demand.
The dong rose 0.2% to 24,345 per dollar as of 10 a.m. local time. The currency lost about 3% this quarter, joining Asian peers lower, as the dollar strength gained momentum.
The numbers raise hopes that growth could further accelerate amid early signs of China’s recovery stabilizing. Purchasing managers’ survey that showed Vietnamese manufacturing sector returning to growth in August — the first time in six months — also support optimism of demand improving.
Still, one quarter’s performance isn’t enough to conclude that the Southeast Asian economy is out of the woods. S&P Global Ratings expects a full recovery only when global demand picks up and as the country gradually resolves its domestic challenges.
One of those challenges include weak credit demand, which has prompted repeated calls from Prime Minister Pham Minh Chinh for a more flexible monetary policy. The nation’s central bank, which has already cut rates four times this year, has flagged limited room to do more.
“These numbers suggest growth is stabilizing and returning to the all important exports and manufacturing sector,” said Ruchir Desai, a co-fund manager at the AFC Asia Frontier Fund. However, achieving a much higher growth rate “will be dependent on a further recovery in exports and government measures to strengthen sentiment on the ground in terms of infrastructure spending and policies linked to the real estate sector.”
--With assistance from Tomoko Sato, Nguyen Kieu Giang, Cecilia Yap, Karl Lester M. Yap and Mai Ngoc Chau.
(Updates with GSO’s comments in the third paragraph, and currency reaction in the fourth.)
