Notwithstanding the weaker purchasing managers’ index (PMI) report for May, HSBC Bank said Vietnam is fast emerging as an important market for retail expansion.
According to a Vietnam economic report launched on June 20, HSBC said the domestic sector remained resilient during the month, with retail sales growing at a solid pace of 13.1% year-on-year in May. Adjusted for inflation, retail sales accelerated by 9.9% year-on-year during the month from 9.2% in April.
Besides, Vietnam ranked sixth in the 2017 Global Retail Development Index (GRDI), up from eleventh last year. The five-notch jump this year was attributed to the recent easing of investment restrictions.
According to HSBC, Vietnam’s retail sector is relatively small, with annual revenues of only around US$90 billion last year. Disposable income is not very high, as the economy has just escaped the “low income” status.
“…But what is important to note is that the country is fast emerging as an important market for retail expansion because more than half of its 92 million population are young and the annual average income (US$2,200 a year in 2016) is expected to increase rapidly in the medium term. A combination of rapidly growing per capita income of Vietnamese consumers and the relaxing of regulations sets the perfect environment for the sector to bloom,” the report said.
Regarding trade, HSBC said the performance of the external sector was encouraging. Even in an uncertain global environment, exports grew by 25% year-on-year in May, while the previous reading was revised upwards to 21.8% (initially, it was reported to be 16%).
Exports of the foreign invested sector rose by 28% year-on-year from 17.2% previously, while the domestic sector posted growth of 18.3%, up from 9.7% in April. Exports of phones and phone parts, the country’s biggest export items, grew a staggering 39.8% (43% in April), helped by a recent new product launch.
Meanwhile, import growth also remained strong at 26.8% year-on-year in May, pushing the trade balance into deficit. However, according to Minister of Planning and Investment Nguyen Chi Dung, the trade deficit is not too worrisome, as the country mainly imported items such as machinery and equipment, electronics, computer and parts, steel, plastics and chemicals, which are typically used in production processes.
Meanwhile, the consumer price index (CPI) easing streak continued with May inflation at 3.2% year-on-year, down from 4.3% in the previous month. Inflation in health costs accounted for more than 90% of the rise in prices.
Although more hikes in hospital and medical service rates are scheduled, the Health Ministry in mid-May announced that revised rates will not come into effect from June. As per the new roadmap for revised rates, 29 provinces and Hanoi will enforce the hiked rates only from August, 14 other provinces and HCMC will apply new rates from October, and the remaining 18 provinces from December.
With these, the medical examination fees, in-patient charges, testing fees and fees for other hospital services are expected to increase by two to four times depending on the levels of hospitals which patients visit.
In contrast, gains in the transport component cooled to 8.1% year-on-year during the month from 11.1% year-on-year in April, as Brent prices were on an average 3.8% lower than the previous month.
Also, food prices remained unchanged, helping to keep overall inflation in check. Mirroring the headline trend, core inflation ebbed to 1.3% year-on-year, from 1.5% in the previous month.
In all, HSBC said the outlook remains strong thanks to the strength of its manufacturing and export oriented sectors. However, the underlying details of the May PMI report were somewhat less encouraging than before and point to the possibility of a soft patch in the near term.
“But, eventually, demand is more likely to revive than fade. For example, in the PMI survey, some respondents mentioned having added to their inventory, implying that they expect demand to gather pace,” it said.
(Source: Thesaigontimes.vn)
