Vietnam aims to grow its economy by 7pc this year
Vietnamese officials aim to expand their economy by 7percent this year, among its fastest rates ever and quicker than world factory powerhouse China, due to investment in manufacturing, lack of trade disputes and the rise of a middle class. The central government has formally decided to pursue GDP growth this year of 6.8percent to 7percent, securities analysis firm SSI Research in Hanoi said January 3. Manufacturing will be the “leading growth vector going forward, with the service sector forecasted to follow closely behind,” the research firm said. A 7percent showing would rank Vietnam among the 10 fastest-growing economies in Asia this year, according to Asian Development Bank data, and place it ahead of China. The development bank forecasts China’s GDP to grow at 6percent. GDP, or gross domestic product, means the value of all goods and services produced over a given timeframe. Money flowing into factories, offices and ports makes up much of Vietnam’s total, said Song Seng Wun, an economist in the private banking unit of CIMB in Singapore. Consumption is now becoming more obvious he said. Foreign-invested manufacturing is expected to lead Vietnam’s economy this year as it has over the past seven, country analysts say. Minimum wages as low as $132 a month and what Song calls “government stability” make Vietnam attractive to capital from abroad. Investors normally come mainly from Japan, Singapore, South Korea and Taiwan. Their Vietnam factories make garments and auto parts as well as consumer electronics. In the first half of 2019, foreign-invested projects were due to allocate $9.1 billion, up nearly 8percent over same period of 2018, the Ministry of Planning and Investment said on its website. Outside manufacturing, analysts point to growth in tourism and higher education.
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Japan posts record machinery orders growth in Nov
Cabinet Office data on Thursday showed that core orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, rose 18.0percent in November from the previous month. That marked the biggest month-on-month gain since comparable data became available in 2005, and also was the first rise since June. The jump in November orders was largely driven by big-ticket items, such as orders for railway cars, transport equipment and thermal hydraulic motors. It shattered a 3.2percent gain forecast by economists in a Reuters poll and more than recouped an unexpected 6.0percent drop in October. “The surge in ‘core’ machinery orders in November was largely due to a spike in transport (and) postal activities and we still expect non-residential investment to fall this year,” said Tom Learmouth, Japan economist at Capital Economics. “Given that capital goods shipments probably fell sharply in Q4, we are still forecasting a sizeable 2.3percent q/q fall in non-residential investment last quarter,” he wrote in a note. Capital expenditure has been a bright spot for the economy in the second and third quarter of last year as companies invested in equipment to prepare for a nationwide tax hike and overcome a tight labor market. Japan’s economy grew at a faster pace than initially reported in July-September last year largely due to upgrades of business and consumer spending. Many analysts expect the gross domestic product reading for the fourth quarter of 2019 due next month to show a contraction as a sales tax hike from October hit consumption, one of the economy’s main growth drivers. Government data last week showed Japan’s inflation-adjusted real wages declined at their fastest pace in four months in November, further clouding the outlook.
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India’s economy faces severe challenges
India’s economy is experiencing a sharp slowdown — to the consternation of many observers. For several years, analysts and organisations such as the IMF and World Bank have touted India as the fastest-growing major economy, with the world’s brightest medium-term outlook. But in December the Reserve Bank of India, the central bank, cut its forecast for 2019 growth in gross domestic product to 5 percent. That headline figure actually understates the slowdown. High-frequency indicators show that in the first eight months of the current fiscal year, non-oil exports and imports have fallen, as has production of investment goods. Production of consumer goods and real government tax receipts have both grown by only 1 percent. And a savage credit crunch has reduced commercial lending to less than Rs1tn in the first six months of this fiscal year, one-seventh its level the previous year. Why have analysts failed to see the severity of the problem? A key factor has been faulty measurement. Ever since a new data system was adopted several years ago, methodological problems have bedevilled GDP estimates. As a result, the official growth rates of 7-7.5 percent since 2011/12 have overstated actual growth by a considerable margin. At the same time, analysts have misdiagnosed the problem because this time really has been different. India has experienced standard business cycles and even macroeconomic crises. But until recently it had never suffered from a serious balance-sheet crisis. After the global financial crisis, corporate profitability collapsed, causing the share of debt owed by companies that do not generate enough cash to service interest payments to skyrocket to 40 percent, according to Credit Suisse. Unlike in macro crises, the impact on the economy from the balance-sheet crisis has not been dramatic. Instead, momentum has slowly ebbed from investment, export and credit growth, while India’s entrepreneurial spirit has been drained. To begin with, India does not have the macroeconomic tools to get the economy out of the slump. Monetary policy is ineffective because central bank rate cuts are not being passed on to customers by financially stressed and risk-averse banks. Fiscal policy is constrained because public-sector deficits have risen to nearly double-digit levels, while debt dynamics are adverse because primary deficits are high as are interest rates compared with growth.
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China’s vice premier is upbeat about the economy
China’s Vice Premier Liu He said on Thursday that China’s 2019 GDP is estimated to grow more than 6percent, according to Chinese state news agency Xinhua News. Liu added that data for this month points to a better-than-expected economic outlook, Xinhua reported. It wasn’t immediately clear which data Liu was referring to. The comments come a day after President Donald Trump signed the “phase one” trade deal with Liu, marking a temporary truce in the trade war between the world’s two largest economies. During the signing ceremony, Liu delivered a message from Chinese President Xi Jinping, who said the agreement is “good for China, for the U.S. and for the whole world,” according to a translation. In his own remarks, Liu said China’s economy is “transitioning from high-speed growth to high-quality development.” He also said “China will continue to enhance the legal environment” and “welcomes investors from around the world,” as the country continues to open up.
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Thailand plans more investment measures to support economy
Thailand is planning additional measures to boost investment to support Southeast Asia’s second-largest economy hit by weak exports and a strong baht THB=TH, its deputy prime minister said on Wednesday. The country needs higher private investment, which has been low at only 16percent of gross domestic product (GDP), Somkid Jatusripitak told a business seminar. “We have to stimulate private investment at a time of the strong baht,” he said. “I’ve already talked with the customs and revenue departments, and there will be a package,” he added. The Board of Investment (BOI) is working on the package, which will be offered to firms that must invest within six months and install equipment within a year. Thailand usually promotes investment with tax incentives. The BOI’s board will meet on the package early next month, the agency has said. Last year, the government launched a relocation package, including tax breaks and special investment zones, to draw foreign companies seeking to move production due to Sino-U.S. trade tensions. Thailand’s trade-reliant economy has been hit by global trade tensions. A strong baht, which was Asia’s best performing currency with a nearly 9percent rise against the U.S. dollar in 2019, has cut export competitiveness. In bid to lift growth, the government aims to accelerate spending of 1 trillion baht ($33.04 billion) in the current quarter, Somkid said. Spending has been slow as the 2020 fiscal budget, which was due to start last October, just won parliamentary approval on Saturday. Budget approval was impeded by the delayed formation of a new government after an election in March. Growth in the final quarter of 2019 was particularly affected by the delayed budget, which has stalled large investment projects, he said. Official 2019 gross domestic product data is due on Feb 17. The central bank estimated 2019 growth at 2.5percent, a five-year low, and forecast 2.8percent growth for this year.
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Indonesia’s regional gdp to grow by 4-7pc in 2020
Economic performance in Indonesia will “continue to improve in 2020” on the back of increased exports and imports, rising private consumption, and growing investment, said UOB analysts in a research note on Tuesday. This comes as Indonesia’s economy clocked a “relatively stable” growth at 5.02 percent year-on-year in Q3 2019, thanks to expansions in most of Indonesia’s regions, noted UOB. UOB said: “Overall, 3Q19 regional economic performance was underpinned by strong domestic demand.” While most regions clocked a gross domestic product (GDP) growth above 5 percent year-on-year, Papua economy shrank by 15.11 percent year-on-year, making it the only region to experience contraction in Q3. That said, UOB expects Indonesia’s regional GDP to expand by 4.0 percent to 7.0 percent in 2020. UOB projects that an improved global economy will lead to more exports than 2019. “Imports might also increase due to the need of capital goods for various investment projects i.e. downstream processing of mining products,” added UOB. UOB also said a larger increase in provincial minimum wage from 2019 will likely drive private consumption in 2020, while investment from government and private projects will continue to power the economy. Growth in Java slowed to 5.6 percent year-on-year in Q3 2019, from 5.7 percent in Q2, owing to weaker household consumption. UOB expects Java’s economic growth to lie somewhere between 5.5 percent and 5.9 percent, as export recovers with an improved global economy and domestic spending strengthens with higher purchasing power. “Increase in business optimism post 2019 presidential election is expected to bring a positive impact on future investment prospects as well as the capital inflow,” added UOB. Similarly, Sumatra’s economic growth dropped to 4.5 percent year-on-year in Q3 2019, from 4.6 percent in Q2, mainly due to both weaker consumption and investment.