Vietnam’s economic expansion gathered some pace for the first time in three quarters, suggesting that growth-boosting measures by authorities are helping the trade-reliant nation.
(Bloomberg) — Vietnam’s economic expansion gathered some pace for the first time in three quarters, suggesting that growth-boosting measures by authorities are helping the trade-reliant nation.
Gross domestic product in the three months ending June rose 4.14% from a year ago, the General Statistics Office said in a statement Thursday. That compares with the median estimate for a 3.8% growth in a Bloomberg survey.
The benchmark Vietnam stocks index was trading 0.2% lower as of 09:27 a.m. local time. The dong was trading little changed in Hanoi.
The stronger-than-expected data comes on the heels of a series of interest-rate cuts by the central bank to support lending, and in turn business and consumption activity in one of Southeast Asia’s fastest-growing economies. To ensure growth sustains, the government announced lower value-added tax on some sectors, and also halved registration fees on locally made cars from July 1 to the end of 2023.
“Government policies to boost domestic consumption and tourism stimulating programs have helped,” the statistics office said in a statement. Earlier this month, the parliament approved extending validity of e-visas to 90-days from 30- days to boost tourism with multiple entry option.
In the first half ended June, the economy expanded 3.72%, still way below average growth of about 5.7% in years before the pandemic. The government targets full-year growth at 6.5%.
The services sector expanded 6.33% in the six months under review, emerging as a key driver of growth. Construction activity expanded 4.74%, while manufacturing output remained lackluster with a growth of 0.37%.
A durable recovery in manufacturing is key to bolstering overall activity in Vietnam, where exports are a main driver of the economy. Data from the statistics office showed an estimated 31,000 businesses closed, awaiting dissolution in the January to June period, up 28.9% year-on-year.
Power shortages during the second quarter also hurt manufacturers in northern Vietnam, although the situation is beginning to improve.
“With the external environment likely to remain unfavourable in the second half of the year, we expect the economy to struggle in the coming quarters,” Shivaan Tandon, economist for emerging Asia at Capital Economics, wrote in a note. He sees the data pointing to the possibility of more rate cuts by the State Bank of Vietnam.
–With assistance from Tomoko Sato, Nguyen Xuan Quynh, Nguyen Kieu Giang, Linh Vu Nguyen, Cecilia Yap, Mai Ngoc Chau and Myungshin Cho.
(Updates with details of business closures in the eighth paragraph and economist comment in the last.)
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