2013-12-10 09:56:45 - Fast Market Research recommends "Vietnam Business Forecast Report Q1 2014" from Business Monitor International, now available
Evidence of improving macroeconomic fundamentals in Vietnam (especially with regards to the outlook for domestic demand) sug -gests to us the balance of risks to our real GDP growth forecast of 6.0% for 2014 is gradually tilting towards the upside. Strong data on foreign direct investment inflows, remittances, passenger car sales, and property market launches, suggests to us that domestic demand is on a nascent recovery, setting the stage for stronger 2014 growth.
The stability we have seen in the Vietnamese dong of late is closely in line with our long-held view that the government's aggressive stance to de-dollarise the economy and adopt a more balanced monetary policy framework will help to bolster confidence in the currency. We also expect improving
current account dynamics that will help to support stability in the currency.
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We are encouraged by the government's recent moves to liberalise fuel and electricity price controls, and we see potential for more ag -gressive reforms to help bring the fiscal accounts back into balance much earlier than investors are anticipating. We forecast the budget deficit to narrow from 5.0% of GDP in 2013 to 4.8% in 2014.
Major Forecast changes
We have slightly revised down our average 2014 headline consumer price inflation forecast from 6.8% to 6.3% to reflect recent data indicating benign inflationary pressures.
Key risks to outlook
Downside Growth risks From rising commodity prices: Should commodity prices witness a strong rebound in 2014, we could see the central bank adopting a more hawkish stance on monetary policy. The risk of having to hike interest rates aggressively would present significant downside risks to economic growth.
Further Deterioration in external Demand: Vietnam's trade ac-count has fallen back into deficit territory in recent months. Should we see a sustained deterioration in the trade balance, we would not be surprised to see the Vietnamese dong coming under further selling pressures.
Partial Table of Contents:
Major Forecast changes
Key risks to outlook
chapter 1: political outlook
BMi political risk ratings
relaxation of Media Laws could come in 2014
- Despite the encouraging progress we have seen with regards to the Communist Party of Vietnam (CPV)'s stance on allowing for broad democratic reforms, we continue to see evidence of the party's hardline stance on having absolute control over the media. However, we believe that the growing adoption of the internet and social media among st the younger population will eventually pressure the CPV to relax its media laws.
VietnaM poLitica L oVerVie W
Long- term political outlook
Key political challenges over the coming Decade
- Vietnam's biggest political question over the coming decade is whether one-party rule under the Communist Party will face growing calls for democratisation, as was the case in other major South East Asian countries. While our core scenario envisages the CPV transforming itself into a technocratic administration, it faces major economic challenges which if mismanaged could lead to widespread unrest. On the foreign policy front, we expect an increasingly powerful China to drive Vietnam further into the camp of Asian nations with close relations with the US.
chapter 2: economic outlook
BMi economic risk ratings
2014 Growth set to impress - Although we expect the Vietnamese economy to record yet another quarter of sub-par growth in Q413, we are beginning to see potential for upside surprises to domestic demand over the coming quarters. Recent data on foreign direct investment inflows, remittances, passenger car sales, and property market launches, suggests to us that domestic demand is on a nascent recovery, setting the stage for stronger 2014 growth.
VietnaM econoMic actiVit Y
reiterating our Benign outlook For consumer prices
- Despite the transitory price pressures as a result of the fuel price hikes in July, we maintain our view that stable commodity prices as a whole and subdued credit growth over the coming months should keep headline consumer price inflation (CPI) anchored around our full-year average forecast of 7.0% for 2013. As for monetary policy, we see little scope for further easing and we expect the State Bank of Vietnam to keep its policy rate on hold at 7.00% through the remainder of 2013.
taBLe: MonetarY poLicY
Balance of payments
Stability Underpinned By De-Dollarisation, Robust FDI Inflows
taBLe: current account
Fiscal outlook on track to improve in 2014
- Despite the Vietnamese government's proposal to raise its budget deficit targets for 2013 and 2014, we maintain a slightly more optimistic view towards the country's fiscal outlook. We forecast the budget deficit to narrow from 5.0% of GDP in 2013 to 4.8% in 2014, driven by a rebound in tax revenue and reduced public spending on fuel subsidies over the coming quarters.
taBLe: F isca L poLicY
the Vietnamese economy to 2022
2013-2022: a new Focus on Quality Growth -
Full Table of Contents is available at:
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