UBS: Vietnam grows faster than China but with many risks

Workers work in a garment factory in Dong Hoi city (Quang Binh).

The Swiss-based global financial group UBS said that Vietnam’s economy grew faster than China last year and still has “huge potential.” However, UBS believes that investors in Vietnam still face some potential risks.

Mr. Kelvin Tay, Regional Investment Director of UBS Global Wealth Management, told CNBC on February 10 that Vietnam’s economic outlook looks positive as Vietnam has been one of the most active economies in Asia with the best performance in the past year and among the few countries that have achieved record growth despite the impact of the COVID-19 pandemic.

Vietnam is a market we like,” said Mr. Tay on CNBC’s “Squawk Box Asia” program.

It’s an economy that we think has great potential,” he noted, adding that the country’s growth rate is “far ahead” of its regional peers.

Vietnam gained 2.9% growth in 2020, only behind Taiwan with 2.98% growth.

Last month, China released its 2020 economic growth report, whereby its gross domestic product (GDP) increased by 2.3%.

In recent years, Vietnam is seen as an alternative manufacturing hub for companies wishing to move production out of China to avoid the effects of trade tensions between Beijing and Washington, according to CNBC.

Japanese Prime Minister Yoshihide and National Assembly Chairwoman Nguyen Thi Kim Ngan in Hanoi on October 19, 2020.

The majority of Japanese companies in Vietnam say they want to expand production here to reduce their dependence on China.

Meanwhile, some countries with many investment projects in Vietnam, typically South Korea, see the COVID-19 pandemic as an opportunity to reduce their dependence on supply chains to China.

Mr. Park Noh Wan, Korean Ambassador to Vietnam, told Tuoi Tre newspaper on February 10: “While the electronics manufacturing, investment, and trade industry around the world has been shrinking due to the negative impacts of the Covid-19 pandemic, Vietnam’s economic growth reached about 3%, the highest in the ASEAN region.”

The South Korean diplomat said the outbreak became an opportunity for Korea to reduce its dependence on China and seek diversification of the global value chain (GVC).

He said that more than 9,000 Korean enterprises in Vietnam will promote the self-reliance of Vietnam’s industry and promote mutually beneficial economic cooperation through reducing the import rate of materials, spare parts, and equipment and supply chain strengthening in Vietnam, as well as technology transfer to Vietnamese enterprises to join the new global value chain.

Even so, the impact of the pandemic on Korean investment in Vietnam is huge, Ambassador Park said: “Korean investment in Vietnam in 2020 decreased by 50% compared to 2019, especially the investment in Korea’s strong area of ​​manufacturing and manufacturing fell 55%.

Previously, the Bloomberg news agency cited forecast results of economists as saying that with the growth rate of Vietnam in 2020 reaching 2.9%, the country’s gross domestic product in 2021 is expected to increase by 7.6%.

Mr. Kelvin Tay recognized that the risk still exists for foreign businesses wanting to invest in Vietnam, which is the liquidity and monetary controls of the government.

If the economy is not performing well, they [the Vietnamese government] can actually devalue the Vietnamese dong just to try to stimulate the economy. At the end of last year, the US Treasury Department labeled the country as a currency manipulator,” said Tay. (Translated)


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