There have been a number of positive signs for the Vietnamese economy, which indicate recovery but at a slow rate, according to a marco-economic report from the Hong Kong and Shanghai Banking Cooperation (HSBC).
HSBC says the Vietnamese economy showing signs of recovery
Vietnam’s Purchasing Managers Index in October was at 51.5 points, indicating an improvement in the domestic business climate. Output, new orders and the labour force have also all been strong.
Meanwhile, GDP per capita income remains low, at around USD1,700, but Vietnam has a good chance to raise it's income level, the bank said.
HSBC warned that it is essential to raise the skills of the workforce in Vietnam, particularly in rural areas.
The bank also considered a move towards more foreign direct investment (FDI), especially in the manufacturing sectors, a positive sign.
So far this year, Vietnam has pulled in total registered FDI of USD13.1 billion, up 95.8% on-year. FDI to the manufacturing sector was at USD9.3 billion, up USD136.5% compared to the same period last year.
Sustainable FDI and lower trade deficits, as well as stable inflation are good foundations for Vietnam to deal with the economic challenges that face the nation. The country’s focus should be on dealing with bad debts, state enterprise reform and infrastructure development, according to HSBC.
However, the bank also warned Vietnam of risks of inflation in the coming months, which may come from rising food prices.
The weak domestic demand has also affected bank operations. Since early this year, credit growth has been very modest, reaching only 6.6% compared to the same period last year.
