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Vietnam a bright spot amid trade tensions: economists

VIETNAM is expected to be one of the world’s fastest growing economies in 2019, and a key destination for manufacturers relocating due to trade tensions between the United States and China, UOB economists said in an Aug 20 research note.

With robust domestic demand and increasing foreign direct investment (FDI), they forecast 6.7 per cent growth for Vietnam in 2019, similar to the official growth target of 6.8 per cent. First-half growth was 6.8 per cent year on year.

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The interest rate environment is likely to stay conducive, with the economists expecting the central bank to keep the policy rate steady at 6.25 per cent for the rest of the year.

Manufacturing hub
As US-China trade tensions continue and tariffs take a toll on China exports, manufacturers have had to consider shifting production to other locations — with Vietnam as one key alternative.

“Several public infrastructure development projects, including construction of new roads and expressways and development of the logistics sector which are expected to be completed before 2030, will enable Vietnam to compete with countries in Greater Mekong to become Asean’s logistics hub,” added the economists.

Labour costs in Vietnam also remain relatively low compared with China and Thailand. Monthly minimum wages in Vietnam range from US$126 to US$180 across different regions; 38 per cent to 54 per cent of China’s, and also less than Thailand’s US$274 rate.

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