As we have seen in recent months Vietnam is proving to be a major beneficiary of the trade tensions between the USA and China. 2019 will be another year of 7% plus GDP growth more than 0.2% over the annual forecast and bilateral foreign trade will exceed US$ 500 billion for the first time and FDI has achieved a 10 year record high with commitments of US$ 38 billion and remitted capital exceeding US$ 20 billion. Over 65% of the commitments were into the processing and manufacturing sectors which augers well for future GDP growth.
This performance in 2019, will be further supported by the trade and services benefits accruing to Vietnam under the CPTPP (already partially in force) and hopefully the soon to be ratified EU Vietnam Foreign Trade Agreement (“FTA”).
The reduced tariffs under the CPTPP are expected to increase Vietnam’s GDP by 1.3% increasing exports to member countries by 4% and reducing imports by 3.8%. The main sectors expected to benefit are footwear, garments and furniture. Similarly for the EU Vietnam FTA the ultimate elimination of 99% of the tariffs will help increase Vietnams exports to the EU, currently over US$ 40 billion by 20% and imports are expected to increase by 15% from the current US$ 13.8 billion.
However, there will also be significant other benefits from the institutional and policy reforms required under both Agreements particularly in the areas of competition, services (including financial services) customs, e-commerce, environment, government procurement, labour standards, market access etc.
Together these measures will likely have a positive impact on the amount of FDI from member countries and bilateral foreign trade and this GDP.
Kenneth M Atkinson
Founder & Senior Board Adviser
Grant Thornton Vietnam
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