Robust exports buoy second-quarter growth
HANOI: Vietnam's economy grew at a faster pace in the second quarter of this year led by strong exports, in an encouraging sign just days after US President Donald Trump said he would place lower-than-threatened 20% tariffs on many Vietnamese products.
Concerns over the South-East Asian manufacturing hub's outlook had been growing in the run up to the trade deal announced last Wednesday, particularly as the United States is Vietnam's biggest export market.
Gross domestic product growth in the April-June quarter accelerated to 7.96% year-on-year, from the 6.93% in the first quarter, government data showed last Saturday.
It was just short of Hanoi's full-year growth target of at least 8%.
'Economic performance in the first half of this year was positive and close to our target amid global and regional economic uncertainty,' the National Statistics Office said.
Exports were a bright spot in the last quarter, rising 18% to US$116.93bil from a year earlier, while imports were up 18.8% at US$112.52bil, translating into a trade surplus of US$4.41bil, the data showed.
Industrial production in the period rose 10.3%, while June consumer prices rose 3.57%.
Trump announced last Wednesday the United States and Vietnam reached a trade deal, under which Vietnamese goods would face a 20% tariff, with trans-shipments from third countries through Vietnam also facing a 40% levy.
Vietnam could import US products with a 0% tariff.
The tariff rates were lower than an initial 46% rate threatened by Trump in April.
Vietnam hailed the deal as a boost for business and said negotiators were working to finalise details, as business groups awaited clarity on the finer points to assess the impact of the new tariffs.
The United States is the largest export market for Vietnam, a regional manufacturing hub housing several multinational companies such as Samsung Electronics and Foxconn.
The United States recorded a trade deficit of US$123bil with Vietnam last year, one of its highest globally.
Vietnam is also home to several Chinese companies, which analysts said are likely the main targets for the 40% tariff on trans-shipments.
China is Vietnam's largest two-way trading partner on which it relies heavily for components and materials for its manufacturing industries.
Fitch Solutions said in a note last Friday that Vietnam's exports and investment will remain strong for the rest of the year and signalled upside risks for its gross domestic product (GDP) growth forecast of 6.4% this year.
'With the new 20% tariff, we think the government will speed up industrial upgrading and shift exports from low-margin goods to higher value-added products such as semiconductors,' it said in a note.
Dominic Scriven, founder and chairman of investment firm Dragon Capital, said the trade deal is 'net-positive' and the potential GDP hit is less severe than feared.
'With external trade risk now moderating, attention can return to the country's core growth engine, the domestic and private-sector economy,' he said. — Reuters
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