ADB lowers Vietnam’s 2018 growth forecast

In its Asian Development Outlook (ADO) 2018 report issued Wednesday, the Asian Development Bank (ADB) also estimates Vietnam’s GDP for 2019 at 6.8 percent.

Explaining the downward revision, the bank said that the year’s second half is likely see a moderate growth in exports, agriculture, construction, and mining sectors.

The bank also believes that the ongoing trade war between the U.S. and China could have spillover impacts on Vietnam’s export and FDI inflows.

Referring to the ongoing trade war between U.S. and China, ADB’s Vietnam Country Director Eric Sidgwick, said the country was vulnerable since it has integrated deeply with global trade.

“These are not good events for Vietnam. As Vietnam is so open … any reduction to global trade is going to affect it,” quoted Sidgwick as saying.

“There may be a beneficial impact in the short term, but we have to see how it plays out over the longer term. The long-term risk is trade contraction in general and high competition from as a result of that Vietnam being squeezed out,” he said.

Vietnam’s growth this year could be dented by lean strength in key export markets such as China, the European Union and Japan, while unfavorable weather conditions could also undermine agricultural output and mining production, ADB said.

ADB advised that Vietnam should continue to monitor the situation to assess the impact of the trade war and respond in timely manner.

To mitigate negative impacts, Vietnam needs to continue to improve its business environment, infrastructure and market diversification, Nguyen Minh Cuong, an ADB economist said.

“This will increase the competitiveness of Vietnam in the global market, whether it is affected by the trade war or not,” he added.

ADB also raised the forecast of inflation rate from 3.7 percent to 4 percent this year, and from 4 percent to 4.5 percent in 2019.

Vietnam’s GDP has sustained and built on last year’s gains with an impressive 7.08 percent growth in the first half of 2018, the highest rate since 2011.