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Vietnam's Economic Growth to Outpace China's Next Year: Report

By next year, Vietnam's economic growth rate is expected to overtake China's performance.

A new report by the Swiss bank UBS shows that Vietnam's GDP is expected to grow by 6.5% this year, while China's rate was 6.7% last year, the business news site BizLive shares. This would be the fourth year in a row that Vietnam has hit at least a 6% growth rate, while China is growing at its slowest pace since 1990.

The bank explained that Vietnam has maintained steady growth by changing its monetary policy, recapitalizing the banking sector and beginning to reform state-owned enterprises (SOEs) after the real estate sector crashed in 2010.

Foreign direct investment (FDI) has also played a key role in Vietnam's recent growth. The news source quotes the UBS report: "Indeed, it is no coincidence that manufacturing FDI growth in Vietnam has escalated as wages in China surge and as China shifts away from low-cost manufacturing. Vietnam, China's low-cost neighbor, is clearly benefiting from the manufacturing migration away from China."

VnExpress adds that FDI disbursement reached a record US$15.8 billion last year, while average monthly salaries increased by 88% from 2010-2015.

While UBS projects strong growth for Vietnam's economy this year, it also warned of potential hurdles. Protectionism, especially following the United States' withdrawal from the Trans-Pacific Partnership, is a concern, as is reliance on FDI.

Professor Pietro Masina of the University of Naples told the newspaper: "Vietnam remains largely dependent on foreign capital and foreign technology. An FDI-led economic model is vulnerable and instable."

[Photo via Stock Investor]

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