Vietnam economy is looking bright, according to a UBS economist

Vietnam economy is looking bright, according to a UBS economist
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Vietnam economy is looking bright, according to a UBS economist, who says it is poised to recover despite the challenge brought by the coronavirus pandemic.

“Vietnam is suffering some pain from the impact of Covid-19, but the outlook is looking one of the brightest in the region,” said Edward Teather, Asean economist at UBS Research, during CNBC’s “Squawk Box Asia” on Monday.

“Retail sales, imports (and) industrial production were all actually up on the year in the month of June, which is better than you can say for most economies in the region,” he added.

Several economies experienced contraction in the second quarter of 2020 compared to a year ago. However, Vietnam economy grew at an estimated 0.36%.

Vietnam is being lauded for successfully managing the coronavirus outbreak even if it shares a border with China, where the first coronavirus case was reported.

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Data compiled by Johns Hopkins University showed that the coronavirus pandemic hit 369 individuals and led to no deaths in Vietnam. The country has for a population of less than 100 million.

“Vietnam is growing and is well-positioned to continue to take global market share in terms of exports going forward, so pretty bright prospects in a relative sense in the region,” Teather said.

The nation is considered an alternative manufacturing hub for firms that want to move their production out of China due to US-China tension that have led to rising tariffs.

US-China tension may escalate, according to Eurasia Group. “There’s a lot of room for escalation here. I think that it’s, by now, quite clear that we’re in for the darkest chapter yet of U.S.-China relations,” Todd Mariano, director for U.S. at Eurasia Group, said during CNBC’s “Squawk Box Asia.”

“We’re seeing moves now more on the technology and export front. I think the troubling sign is simply the multiplicity of fronts at which the two countries are fighting or preparing to fight,” he said.

Boost to the economy

Meanwhile, Teather said that Vietnam’s free trade deal with the European Union could attract inflows of foreign direct investment.

He predicts that overall FDI levels may struggle, in part because investors cannot travel right away. However, he noted that there is “plenty of activity” in the pipeline, and those investments could rise again in 2021 as border restrictions are loosened.

Government support may also empower the economy, according to him. “The prime minister just over the weekend was calling for more measures to support the economy, and the central bank was actually saying they want to get credit growth up over 10%.”

“It does look as if the authorities, having got some momentum are pushing further,” he added.

Recovery from the pandemic

Vietnamese society must accept a “new normal” of living with the disease, Prime Minister Nguyen Xuan Phuc said. He advised people to “wear masks in public, keep a reasonable distance and avoid crowded gatherings.”

“While preventing and fighting epidemics successfully with strict social distancing, we must still ensure trade in goods, job creation and socioeconomic development,” Phuc told the steering committee meeting.

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