US-China Trade War Seen as Boosting Vietnam Growth | WPN World People News

Vietnam will enjoy the fastest economic growth in Southeast Asia in 2020, according to a new forecast from British multinational investment bank HSBC.

Vietnam has been a beneficiary of the China-U.S. trade war, enjoying a boost in services and exports that should drive economic growth to 7% this year, HSBC economist Yun Liu said last week. But she said the country remains vulnerable to economic risks including trade protection and inflation.

Inflation is increasing as swine flu forces up the price of pork, showing how a single product can weigh on the economic indicators of an entire nation of nearly 100 million people. Vietnam also fears rising inflation if simmering Middle East tensions continue to push up oil prices.

Nevertheless, Liu predicted the communist nation’s “impressive” economic performance will give it another "year in the 7% club," outshining fast-growing Myanmar, the Philippines, and other members of the Association of Southeast Asian Nations.

Nintendo, Apple

Liu noted that some of the biggest names in technology, ranging from Nintendo to Google, are relocating to Vietnam, probably because the trade war is making production in China more expensive.

"Likely due to the trade tensions that have accelerated multinational corporations’ relocation decisions, many tech giants, including Apple, Google, Nintendo and Kyocera, have now followed in Samsung’s footsteps and plan to move parts of their production to Vietnam," Liu forecast

Samsung, the Korean smartphone giant, already accounts for close to one quarter of Vietnam’s exports, but others are following the same path. Total electronics exports to the United States rose 76% in the first 11 months of 2019, as U.S. tariffs made Chinese-made phones more expensive for Americans.

"Contrary to many Asian countries which have seen a contraction in industrial activity, Vietnam’s manufacturing sector remained resilient [in 2019], contributing 30% to headline GDP growth," Liu said.

Also contributing to GDP growth are increases in tourism and private consumption among Vietnamese citizens themselves.

Risks

The solid growth has brought renewed risk of inflation, a problem Hanoi had mostly brought under control in recent years. Prices last month rose by 5.2% on an annualized basis -- the highest monthly figure since January 2014. Economists attribute the unexpected jump in part to higher pork prices.

"The economy faces two key risks over the coming year,” said Gareth Leather, a senior Asia economist, in an analysis for research company Capital Economics. Citing trade protectionism as one risk, he said the other “is the outbreak of African swine fever, which has led to a sharp rise in pork prices."

Liu agrees. She said Vietnam faces "a confluence of factors including higher pork demand in the run-up to the Tet holidays [Lunar New Year] and likely competition with mainland China on pork imports as the latter has recently lowered pork tariffs."

The regional minimum wage in Vietnam has also increased, while oil prices around the world spiked after a U.S. airstrike killed Qassem Soleimani, commander of Iran’s Quds Force. Leather said the most vulnerable Asian nations are Vietnam, India and China.

He also voiced a widely held sentiment regarding Vietnam’s trade imbalance with the United States. "Vietnam’s growing bilateral trade surplus with the U.S. could lead to retaliatory action," Leather said.

Source: Voice of America