With a population of almost 90 million, over half of which is under the age of 30, Vietnam has both a robust cheap labor force to fuel its export-oriented economy, and an attractive urbanizing consumer base. These growth engines have been held back in recent years by state-owned enterprises (SOEs) that balked at reform following entry into the World Trade Organization in 2007, and a banking sector that is rife with mismanagement. The central bank estimates that bad debt accounts for 7.8% of outstanding loans, and credit growth has faltered as a result.Following years of disappointing economic growth, a rebound looks to be on the horizon. We expect GDP to grow by 6.4% this year and 6.6% in 2016, inching closer to the past decade's average of nearly 7%. Plans for structural reform show promise, including a project by the Asian Development Bank to develop corporate governance and equitize SOEs, and the creation of Vietnam Asset Management Company, charged with resolving some US$4.8 billion of non-performing loans. Further encouraging is development of the Trans-Pacific Partnership, a free trade agreement that could substantially boost Vietnam’s GDP growth. Meaningful reform would come at the expense of powerful embedded interests, and it is yet unclear if Vietnam has the strength of leadership and political will to overcome this hurdle.
Vietnam Ho Chi Minh Stock Index (VN-Index) 732.87 5.88 (0.81%) 5.88 (0.81%)
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