Vietnam economy likely to remain an outperformer in Asia, GDP to remain upbeat

The Vietnamese economy is expected to remain an outperformer throughout Asia, delivering rapid rates of growth in gross domestic product. Manufacturing and exports continue to be the twin bright spots of the economy, reflecting Vietnam's continued competitiveness. However, upside risks to inflation and limited scope for fiscal and monetary easing weighs on the outlook in the near term.

The latest PMI survey shows that the manufacturing sector - the sector that attracts most FDI - continued to expand in August for the ninth straight month, even as some Asian countries and most Western economies have struggled to stay above the water line. Further, global headwinds notwithstanding, overseas demand for Vietnam's goods has been resilient. Similarly, Vietnam as an investment destination remains as attractive as ever.

The budget deficit is already under strain from escalating public spending. After all, demand for public services is growing rapidly given the country's young population. At the same time, revenues have come under pressure due to lower oil prices and a slower pace of divestment.

Despite these evident challenges, Vietnam continues to outperform. Meanwhile, the government is pressing ahead with structural reforms, which, if pursued rigorously, should lift Vietnam's growth rate over time. For example, Vietnam has revamped its privatization procedures (or "equitization" in local parlance) to provide greater pricing transparency via a "book building method". In addition, officials keep pruning foreign ownership restrictions for listed companies, HSBC Global Research reported.