Vietnam and the World Economic Outlook

Annual Forum 2020

In Partnership With:
Vietnam and the World Economic Outlook

December 10, 2020

Darryl James Dong

IFC Vietnam
Global economic growth stalling

Most countries suffering historic shock . . . still in unprecedented contractions.

China and Vietnam growth stands out, rebounding strongly in Q3 2020.

GDP GROWTH Q3 2020 (%, y/y)

10
4.9
5 2.6

0
-1.3
-5 -2.9
-4.6 -4.3 -4.2 -3.6
-5.6 -4.7
-6.3 -5.9
-10
-9.6 -9 -8.7
-15

-20 -17.2

-25 -23.5

Indonesia
Germany
Australia

United States

Korea
Turkey

France
United Kingdom

Vietnam
Italy
South Africa
India

Russia

China
Canada
Japan
Mexico

SOURCE: WORLD BANK, IFC

3
Global economy outlook

KEY RISKS OUTLOOK

The pandemic leading to more inward-looking trade policies . . . 2020 global GDP to contract by 5.2%, the deepest global
fragmenting current production processes and onshore activity. recession in eight decades.

Commodity-reliant economies face weak demand and further
obstacles to growth.
Human capital development set-back concerns in developing
markets due to negative impact of COVID.
Global contraction could exasperate if it takes longer to bring
the pandemic under control, or if financial stress triggers
cascading defaults.

WORLD ECONOMIC GROWTH RATE (%, Y/Y)

6

4
4.2
2 3.3 3.0
2.4
0

-2

-4 -5.2
-6
2017 2018 2019e 2020f 2021f
SOURCE: WORLD BANK, IFC
4
Vietnam poised for growth amid on-going Covid-19 pandemic

6 1

Vietnam
infrastructure in up- Successfully managing
cycle stage Covid-19

5 2
Beneficiary of
Resilient
global supply
economic growth
chain re-alignment

4 3

Demographic Fast growing private

advantages sector

5
1. Vietnam effectively managing pandemic

Vietnam managing COVID-19 well.

Aggressive testing at scale.
Responsive and deliberate actions.

Total positive cases per million (population), As of 30 November 2020 No. of tests per positive case, As at 30 November 20

10,000
Singapore 5,372
9,000
Singapore

8,000 China 1,077

7,000 Vietnam 698

Vietnam effectively managed its 1st COVID-19 wave
6,000 and the 2nd wave in Danang.
Thailand 559
5,000 Vietnam viewed globally as exemplary model for Vietnam aggressive
COVID-19 containment and management. Philippines S. Korea 40 testing, surpassed
4,000 only by Singapore
Philippines 19 and China
3,000
Indonesia
Japan
2,000 15
China
1,000 Thailand Malaysia
13
Vietnam
0 Indonesia 7
Mar-20 May-20 Jul-20 Sep-20 Nov-20

SOURCE: OUR WORLD IN DATA

6
2. Vietnam economy remains resilient

The only SE Asia country reported Vietnam projected to continue its

positive GDP growth in 2020 . . . recovery trajectory into 2021 . . .
Quarterly GDP growth yoy, % Real GDP growth forecast for 2021, %

8%
Vietnam China 7.9%
6%

4%
Vietnam 6.8%
2%
Malaysia 6.3%
0%

-2% Malaysia
Philippines 5.3%
Vietnam GDP growth Indonesia
-4%
slowed to +0.36% Thailand
2Q20, but economy did Singapore 5.0%
-8% not contract . . . GDP Singapore
growth now
-10% accelerating upward Thailand 4.9%
Philippines
-12%
Indonesia 4.4%

-20%
USA 3.1%
Sep-14 Sep-16 Sep-18 Sep-20

SOURCE: WORLD BANK, FITCH RATING

7
3. Fast growing private sector

Private sector investment growing fast . . . Private sector consumption growing fast . . .
largest share of investment in Vietnam drives 70% of Vietnam GDP
Investment, USD bn (at constant 2010 price) Private sector consumption
CAGR 2010-19 % of GDP, 2019

88
Malaysia 8.7% 74.6%
Private
73 Foreign
Investment China 8.2% 37.7%
61
Rapid sector Driv ing GDP
Vietnam grow th 6.8% grow th
69.9%
52
44 Private
Private sector Domestic Singapore 6.0% 50.1%
~70% of total Investment
investment
Indonesia 5.2% 57.4%

State
Investment Philippines 3.6% 58.9%

Thailand 3.1% 35.7%

2011 12 13 14 15 16 17 18 2019

SOURCE: WORLD BANK, IFC

8
4. Demographic advantages

Prime working-age population Robust middle-class formation

% of working-age population Middle class growth, 2019-2024 CAGR (%)

50%
Vietnam 13.9%
45% of Vietnam
population is prime
Fastest middle-
working-age Philippines 7.9%
45% class growth in
SE Asia

Indonesia 7.2%
Philippines
40%

Thailand 5.0%
Vietnam
35%
China China 4.5%

Japan
30% Malaysia 2.8%

Singapore 1.1%
25%
1980 2000 2020 2040 2060
SOURCE: OECD, EUROMONITOR
9
5. Beneficiary of global supply chain re-alignment

Vietnam prime destination for

Major companies relocating factories to Vietnam (as of YE19)
supply chain re-alignment . . .
No. of major firms
C ompany S tatus Location in Vie tnam Industry
relocating in the region
As of end of 2019
Hanwa Aero Moved Hanoi Aerospace
Vietnam
26 benefiting Yokowo Moved Ha Nam Automotive
Vietnam
from global
supply chain Huafu Fashion Moved Long An Textiles
Taiwan, consolidation
11
China Electronics
Goertek Moving Bac Ninh

Thailand 8 TCL Moving Binh Duong Electronics

Foxconn Considering Bac Giang, Quang Ninh Electronics

Japan 5
Lenovo Considering Bac Ninh Electronics
Cambodia 4
Nintendo Considering TBD Electronics

Others 16 Sharp Considering Binh Duong Electronics

Kyocera Considering Hai Phong Electronics

Total 70
Asiscs Considering TBD Footwear

SOURCE: SAVILLS, BLOOMBERG

10
6. Vietnam infrastructure spending points to high(er) GDP growth

Higher infrastructure spending correlates Vietnam infrastructure investment heading

with higher GDP growth into period of increased spending

Infrastructure investment growth GDP growth

Average GDP growth, % yoy
18% 9.0%

16% Projected Vietnam infra

8.0% spending points to
(1960-80)
(1995-05)
high(er) GDP growth
14%
Singapore 7.0%
12%
China
10% (1980-95) 6.0%

Thailand
8% (2000-15) (1975-90)
5.0%
Prior Vietnam
(1960-80)
infra spending
6%
correlated with
4.0%
(2000-17) high GDP growth
4% Higher Asia infra
Japan spending correlates
with higher GDP
2% 0.0%
(2000-15) growth

0% -4.5%
0% 5% 10% 15% 20% 25% 2011 2013 2015 2017 2019 2021F 2023F 2025F

Average Infrastructure Investment, % of GDP

SOURCE: OECD, FITCH CONNECT

11
Despite Vietnam resilience . . . Global and Regional Headwinds

Capital outflows – Currencies, External – Weak global growth,

reserves, external funding financial markets, remittances,
Deterioration of commodity prices
Market depth – Limited, amplifies
asset price moves
macro-outlook Domestic – Pre-existing financial
vulnerabilities, less financial
Domestic investor base – Primary sector depth, limited policy
government bond issuances response capacity

Domestic and Weaker public and

external financial private balance
conditions tighten sheets

Liquidity risk – (USD) Funding, Public – Fiscal stimulus, revenues,

redemptions fiscal deficit; worsened ratings
Market risk – Mark-to-market and
fire-sales. Sovereign-bank nexus Corporate – Weaker earnings;
Increase in risks and repayment; ratings; defaults
Credit risk – NPLs, legacy Financial institution
weaker market Households – Jobs loss; fall in
challenges resilience impacted
functioning consumption
Operational risk – Cyber attacks

SOURCE: THE WORLD BANK

12
Despite Vietnam resilience . . . Global and Regional Headwinds

KEY RISKS OUTLOOK

Vietnam’s economy is expected to remain resilient, supported

by strong fundamentals, including a diversified trade structure
Downside risks remain if there are new waves of COVID-19 and recently signed free trade agreements (EVFTA and
outbreak. RCEP).

Falling external demand in leading trade partners (e.g. the US, Vietnam is projected to grow at 2.8 percent y/y in 2020 (the
the EU and Japan) could pose another risks to Vietnam. fifth highest in the world).

Banking sector fragilities, fiscal distress and incomplete VIETNAM ECONOMIC GROWTH RATE (%, Y/Y)
structural reforms could have a long-term impacts on the 8
7
economy. 6 6.8 7.1 7.0 6.8
5
4
3
2 2.8
1
0
2017 2018 2019e 2020f 2021f

SOURCE: THE WORLD BANK

13
THANK YOU