Macroeconomic report- August CONTENTS Summary. 2 World economy.. 3 Vietnam economy.. 7 Risks and challenges.10 Prospects 11

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2 CONTENTS Summary. 2 World economy.. 3 Vietnam economy.. 7 Risks and challenges.10 Prospects 11 1

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4 SUMMARY MAJOR ISSUES The global economy showed some positive signs, but new risks started to emerge. The US economy continued to show potentials for a positive growth rate, which could be seen from consumption and manufacturing indices and an improvement in employment. However, the strong recovery in the economies of the US s important partners, which include the Eurozone and Japan, resulted in the steepest drop in the USD in the last 2 years. New economic risks started to emerge, as the increase in the impact of political tensions coming from Korean Peninsula is beyond the control of major economies. The Vietnam economy continued to recover thanks to the growth in the service sector and exports. Industrial manufacturing showed some improvement in July. Most notably, the mining sector recovered as crude oil prices rose, in fact, were above 50USD/barrel, which enhances the prospect of producing 1 million more tons of crude oil to boost economic growth. Meanwhile, the slow disbursement process from the state budget was still the biggest challenge to the government s target for increasing the total investment capital to boost growth. The average interest rate decreased slightly in the second half of the year. Interest rates in July dropped due to the fall in inflation in the first 6 months, which made the State Bank of Vietnam (SBV) cut the policy interest rate to boost credit. Interest rates will continue to follow the downward trend because of the fall in expected inflation. However, since credit had grown at a higher rate than capital mobilisation recently, we believe that interest rates will fall gently. 2

5 WORLD ECONOMY MAJOR ISSUES US Economy The US economy grew at a steady rate The US economy grew at a steady rate. According to the estimation of the US Bureau of Economic Analysis, GDP in Q2 increased by 2.6% (QoQ) and increased by 2.1% compared to the same period last year. It is the highest growth rate since Q This growth rate was achieved thanks to the high level of activity in manufacturing; the IPI rose continuously in the first 6 months and reached at the end of June 2017, a two-year high. At the end of Q2, both personal consumption expenditure and retail sales increased by almost 4% compared to the same period last year. PMI was 53.2 in July, a four-month high, which builds up the trust of manufacturers in business activities. Economic recovery had a positive impact on employment as the US unemployment rate in July slipped back to 4.3%, a sixteen-year low. Despite the strong economic growth, salaries still rose at a slow pace, which put the Fed under pressure to raise Despite the strong economic growth, salaries still rose at a slow pace, which did not put the Fed under pressure to raise interest rates sooner. The growth rate of the US salaries in last 3 months slowed down compared to the same period last year and fluctuated around 2.5%. The slow growth rate made it difficult for inflation to reach the target of 2%, especially in the current situation when inflation fell continuously in the last 6 months. This may further delay the FED s plan to raise interest rate in the future. Inflation continued to drop in July 7 Figure 1. The US core inflation and overall inflation (%) The US salaries grew at a slow pace Figure 2. The number of new jobs and unemployment rate in the US 3

6 Source: FRED, CEIC USD dropped to a two-year low due to the recovery of major economies, which include the Eurozone, the UK and Japan. USD dropped to a two-year low due to the recovery of major economies, which include the Eurozone, the UK and Japan. At the end of July, the Eurozone s economic recovery helped increase the value of the Euro against the USD by 12%. The flourishing economy also raised the value of sterling pound against the USD to a two-year high. Meanwhile, the gentle growth of the Japanese economy made the value of the Yen reach a four-month high. The USD index fell sharply in July Figure 3. The USD index in the period Source: CEIC Eurozone economy Eurozone economy grew at the fastest pace since the European sovereign debt crisis 5 years ago. Unemployment rate of the Eurozone dropped to an eightyear low. Eurozone economy grew at the fastest pace since the European sovereign debt crisis 5 years ago. GDP growth rate increased in 17 consecutive quarters, and reached 2.1% in Q (YoY). The positive growth in manufacturing is still a major motivation as the PMI reached 56.6 in July. Although it is lower than the June level (57.4), this number still reflects a stable growth in manufacturing, as the number of new orders remained stable and is expected to grow in the next months. Unemployment rate of the Eurozone dropped to an eight-year low. The breakthrough in manufacturing created an employment boom in the Eurozone, when the unemployment rate fell to 9.1%, a decade low. 4

7 The growth of EU economy made a breakthrough in Q2 Figure 4. EU s GDP growth (YoY) in the period Source: CEIC COMMODITIES At the end of July, prices of almost every item rose due to the fall in the value of USD. The food price index rose in July. Cereal price increased by 5.1% compared to last month, to a two-year high because of the dry and hot weather, which affected the wheat fileds in North America. In addition, milk prices climbed to a three-year high, as the manufacturers reduced supply and the demand for importing powdered milk in Asia rose. Price indices of commodities rose due in July Figure 5. The world s energy and food price indices Source: The Pink Sheet (WorldBank) 5

8 Energy price index recovered, mostly thanks to the recovery of oil price. Crude oil price once reached a two-month high, because of the fear that the US sanctions on Venezuela may affect supply. Furthermore, Organisation of the Petroleum Exporting Countries (OPEC) asked its member countries to keep to an agreement on cutting oil production to drive up the crude oil price. At the end of July, the price of light, sweet crude oil (WTI) rose by 1% compared to last month and reached 50.17USD/barrel, whereas Brent oil price was 52.65USD/barrel. The price index of metals and minerals recovered in July after dropping for 4 consecutive months. It is mainly because copper price rose sharply, which was due to a strong demand in China to serve manufacturing purposes. In addition, the strike of Chilean and Peru miners at the end of June resulted in a supply disruption and raised the copper price. 6

9 VIETNAM ECONOMY MAJOR ISSUES A positive growth happens in Service sector and exports in July The service sector and exports experienced an impressive growth. To be more specific, the retail sales of the first 7 months of 2017 (excluding the price factor) increased by 8.4% (YoY) and 10% (including the price factor), which is higher than that of the same period in 2016 (9.4%). Retail sales in trade contributed 7.54% in the general growth, which made it the biggest contributor, the figures for hotel and restaurant sectors and services of tourism were 2.4% and 1.65%, respectively. The dramatic growth in retail sales reflected an increase in domestic demand. It also built up a momentum for the economic growth at the end of the year. Retail sales continued to flourish in July Figure 6. Growth in total retail sales of goods and services (%) YoY Trade balance was in surplus in July Figure 7. Vietnam's trade balance, by economic sectors (Million USD) Source: GSO The positive growth in the service and export sectors stimulated the aggregate demand. Trade surplus in July is estimated to reach million USD. This is a six-month high. Trade surplus was brought about due to the fact that the excess of imports over exports of FDI sector reached 1.95 billion USD, while domestic economic sector had a trade gap of 1.64 billion USD. The main export products were computer, electronic components and machines for the purpose of manufacturing. 7

10 PMI decreased from 52.5 points in the June to 51.7 points in July, which reflected a moderate improvement in manufacturing sector PMI decreased from 52.5 points in the June to 51.7 points in July, which reflected a moderate improvement in manufacturing sector. In particular, manufacturing outputs were at the lowest level in the last 9 months. Moreover, new orders in July grew at the slowest level in the last 17 months, which led to a slight increase in inventory. Moderate improvement in manufacturing sector Figure 8. PMI and the growth rate of industrial production index Manufacturing continued to recover Figure 9. The Growth rate of industrial production index, by type of production Source: GSO There were some positive changes in industrial production in July The high liquidity of banking system caused the continuous issuance of the bill by State Bank to draw the money back There were some positive changes in industrial production in July. Industrial production index (IPI) increased by 8.1% (YoY) in July, which is lower than the June level (8.92%); however, it was still higher than that of the same period in In the first 7 months of 2017, IPI increased by 6.5% compared to the same period last year. Specifically, manufacturing sector grew by 10.6% and contributed 7.45pp to the general growth rate, which made it the biggest contributor. Meanwhile, mining industry started to recover at the beginning of the third quarter after decreasing for 3 consecutive months. The high liquidity of the banking system led to the continuous issuance of bills by State Bank to draw money back. The high liquidity was mainly due to the fact that the State Bank had bought a large amount of foreign currency to increase the foreign reserve. This led to higher demand for VND in the market. The issuance of bills through OMO drew back billion VND in July only. 8

11 The gap between credits and capital mobilisation decreased Figure 10. Credit- to- deposit ratios in the period SBV drew money back due to high liquidty in the banking system Figure 11. Credit and deposit growth in the period Source: SBV, CEIC The average rate interest rates followed a downward trend The average rate interest rates followed a downward trend. The money market witnessed a decline in all types of interest in July. The fall of interbank interest rate, which was caused by the high liquidity in the banking system, reduced the pressure for boosting capital mobilisation to support credit. Moreover, at the end of July, SBV decided to reduce the policy interest rate and the ceiling on lending interest rate. It was carried out to identify the current state of the market, was not meant to put banks under pressure to decrease interest rates. Deposit interest rates decreased in all terms Table 1. Average deposit interest rates of commercial banks Interbank interest rate decreased Figure 12. Interbank interest rate in the period Term month months months months months months Source: MarketIntello, GSO 9

12 The exchange rate remained stable in July The Exchange rate remained stable in July. The value of USD/VND in commercial banks and the free market remained at the level of 22,730 VND. The decrease of USD Index helped the USD/VND currency pair avoid a lot of pressure. Additionally, the trade surplus somewhat decreased the demand for foreign currency, which made the exchange rate stable. The exchange rate remained stable in July Figure 13. USD / VND exchange rate of Vietnam in the period The disbursement process of the Government budget was behind schedule. Figure 14. Capital investment and the growth rate of investment from state budget, %YoY Source: GSO Investment by Government budget increases in July, compared to the same period last year; however, the disbursement and capital Investment by Government budget increased in July, compared to the same period last year; however, the disbursement and capital implementation were still slow. According to the latest statistic of Ministry of Finance, the estimated disbursement of investment from Government budget in first 7 months was 119 thousand billion VND, which equals to 38.6% of the planned capital that The Prime Minister assigned (more than 309 thousand billion VND), and was higher than that of the same period last year. However, compared to the total investment according to the National Assembly s resolution (357 thousand billion VND), the disbursement had just reached 33.4%, which equals to that of the same period last year. RISKS AND CHALLENGES The Missile launches of North Korea might create conflicts which are beyond the control of powerful nations The Missile launches of North Korea might create conflicts which are beyond the control of powerful nations. The US responded strongly through the imposition of sanctions. The reaction of the US may create a trade war between the US and China, as the US wants to use trade as a 10

13 weapon to force China to intervene more in the missile development program of North Korea. Keeping to the schedule of disbursement from the state budget is a challenge to Vietnam economy to improve economic growth Keeping to the schedule of disbursement from the state budget is a challenge to Vietnam economy to improve economic growth. Basically, the collaboration among the Government, industries and local authorities during the implementation of public investment plans was not strong enough. The fact that the approval and inspecting process of investment plans were too slow would limit the effectiveness of shortterm solutions to drive up the total investment capital to 35% of the GDP in PROSPECTS The exchange rate remained stable and inflation is far from the target of 4%, which made real interest rate become quite attractive and allowed the mobilisation of capital from citizens to create stimulation for economic growth at the end of the year. Industrial production and the growth in services will continue to be the driving forces of the economy in the second half of 2017 Recovery in crude oil price enhances the prospect of of producing 1 million tons of crude oil to support economic growth Industrial production and the growth in services will continue to be the driving forces of the economy in the second half of The steady growth in retail sales and the service sector, together with the prosperity of industrial production, is the reason to expect higher growth in the second half of the year compared to the first half. Recovery in crude oil price enhances the prospect of of producing 1 million tons of crude oil to support economic growth. Firstly, oil prices displayed signs of increasing above the level of 50 USD/barrel thanks to the agreement of OPEC to cut oil outputs. Additionally, production in the mining sector showed signs of recovery in July. As a result, the prospect of producing more crude oil to boost economic growth in the second half of the year is enhanced. The detailed forcasts are as follow: Inflation would remain at a low level in the second half of 2017 The average interest rates will slightly decrease Inflation would remain at a low level in the second half of Inflation has a tendency to increase in the third quarter under the pressure of the rising prices of public goods such as health care, education and electricity. The price of fresh food will recover after a deep reduction in the second quarter. However, inflation will decrease and stop at 2.3 % at the end of The average interest rates will slightly decrease. The continuous fall in inflation led the State Bank to the decision of decreasing interest rates to stimulate the credit activities. This also leads to a decrease in market interest rate. However, since the credit growth rate has been significantly higher than the rate of capital mobilisation recently, interest 11

14 rates is likely to rise. These Two opposite forces would lead to a slight drop in interest rates in the last months of the year. VND would depreciate slightly in the second half of VND would depreciate slightly in the second half of FED would not rush to raise the interest level since it lowered its expectations for the growth of the US economy. This means that the USD will maintain its current weak status against other currencies. In addition, SBV has begun to actively raise its reference exchange rate to deal with FED s actions. Therefore, we believe that VND would slightly depreciate under the pressure of increasing imports in the domestic sector in the second half of the year. Table 2. Forecast of major macroeconomic indicators for 2017 Indicators (end of term) Q Q1 2017Q2 2017Q GDP growth, YTD (YoY, %) GDP growth (YoY, %) Inflation, end of period (YoY, %) (0) (0) (0) (0) (-0.2) (-0.2) USD/VND exchange rate, end of period, selling price 22,540 22,335 22,785 22,790 22,770 Money supply (M2), growth (YTD, %) * Domestic outstanding credit growth (YTD, %) ,900 23,000 (0) (0) (0) (0) (-1.5) (-0.5) 3-month-deposit interest rate, period average, % 12-month-deposit interest rate, period average, % (0) (+0.3) (+0.2) (+0.2) (*) Estimates by MarketIntello are based on disclosures by GSO and SBV. Note: values in parentheses are changes compared to last term s forecast Source: MarketIntello 12

15 Indicator Table 3. Forecast of the world economy in 2017 and 2018 IMF (07/2017) Worldbank (06/2017) Change (04/ 2017) Change (06/2016) World output (% yoy) Developed countries US Euro Area Japan Emerging Market and Developing Economies Emerging and Developing Asia China ASEAN-5 ** World s trade volume (% yoy) Oil price (U.S. dollar) Source: IMF and the Worldbank 13

16 FORECAST MACROECONOMIC INDICATORS FOR VIETNAM Real GDP Growth Point Forecast Previous Forecast Historical** Note: * Percentile bands in the forecast probability distribution ** Source: GSO Forecast in the past years Forecast Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar * 50-75* 25-50* 05-25* % (YoY) CPI Inflation Point Forecast Previous forecast Historical** Note: * Percentile bands in the forecast probability distribution ** Source: GSO Forecast in the past years Forecast Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar * 50-75* 25-50* 05-25* % (YoY) Month Deposit Interest Rate Point Forecast Historical** Previous forecast Forecast in the past years Forecast % USD/VND Exchange Rate Point Forecast Previous forecast Historical** 75-95* 50-75* 25-50* '000 VND * Note: * Percentile bands in the forecast probability distribution ** Source: IMF, and Vietcombank Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar Note: * Percentile bands in the forecast probability distribution ** Source: GSO and Vietcaombank Forecast in the past years Forecast Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar Export $bn Import $bn Point Forecast Previous forecast Historical** 70 Point Forecast Historical** Previous forecast * 50-75* 25-50* 05-25* * 50-75* 25-50* * 40 Note: * Percentile bands in the forecast probability distribution ** Source: GSO Forecast in the past years Forecast Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar Note: * Percentile bands in the forecast probability distribution ** Source: GSO Forecast in the past years Forecast Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar Money Supply Point Forecast Previous forecast Historical** 75-95* 50-75* 25-50* % (YoY) METHODOLOGY Frequency/ Horizon Results Historical Data Sources Update Schedule Forecast Verification Quarterly and five periods ahead (i) Point forecast, and (ii) the corresponding confidence interval (i.e. associated probability) Vietnam General Statistics Office (GSO), International Monetary Fund (IMF), Vietcombank, & other official sources The forecast is to be regularly revised on quarterly basis, and when the new data or information comes up Back-casting Note: * Percentile bands in the forecast probability distribution ** Source: IMF Forecast in the past years Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar * Forecast EconometricModel Expert insight Bayesian Vector Autoregressive Model (BVAR) Gibbs Sampling (The most advanced econometric model) To be made available to adjust the forecast upon request by clients Produced by MarketIntello Vietnam

17 Appendix 1: Developed markets major macroeconomic indicators 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 T US GDP growth, price 2010, % YoY 1.4% 3.5% 2.1% 1.4% 2.6% CPI growth, % YoY 1.0% 1.5% 2.1% 2.4% 1.6% Industrial Production growth, % YoY -0.8% -1.2% 0.8% 1.3% 2.0% Composite PMI, end of term Unemployment rates, % 4.9% 4.9% 4.7% 4.5% 4.4% Trade balance, bn USD, YTD Current-account balance, bn USD, YTD Budget balance (% GDP) -1.9% -2.9% -3.2% 3-month LIBOR, %, end of term 0.7% 0.8% 1.0% 1.1% 1.3% 1.3% 10-year government bonds %, end of term 1.5% 1.6% 2.4% 2.4% 2.3% 2.3% Eurozone (EU19) GDP growth, YoY % 1.6% 1.8% 1.7% 1.9% 2.1% CPI growth, YoY % 0.1% 0.4% 1.2% 1.6% 1.4% Industrial Production growth, YoY% 0.8% 1.4% 2.2% 2.5% Composite PMI, end of term Unemployment rates % 10.1% 9.9% 9.6% 9.4% 9.1% Trade balance, bn EUR, YTD Current-account balance, bn USD, YTD Exchange rates (USD/EUR), end of term Budget balance (% GDP) -1.8% -1.7% 3-month LIBOR EUR, %, end of term -0.27% -0.30% -0.3% -0.3% -0.37% -0.37% China GDP growth, YoY % 6.7% 6.7% 6.7% 6.9% 6.9% CPI growth, YoY % 1.9% 1.9% 2.1% 0.9% 1.5% Industrial Production growth, YoY% 6.2% 6.1% 6.0% 7.6% 7.6% Caixin Manufaturing PMI, end of term Unemployment rates, % 4.1% 4.0% 4.0% Trade balance, bn USD, YTD Current-account balance, bn USD, YTD Exchange rates (USD/CNY) Budget balance (% GDP) -2.9% 3-month interest rates %, end of term 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 10-year government bonds %, end of term 2.9% 2.8% 3.1% 3.3% 3.6% 3.6% Japan GDP growth, price 2010, YoY % 0.6% 0.9% CPI growth, YoY % -0.4% -0.5% 0.3% 0.4% 0.4% Industrial Production growth, YoY% -1.5% 1.5% 3.2% 3.7% 4.8% Manufaturing PMI, end of term Unemployment rates % 3.10% 3.00% 3.10% 3.00% 2.80% Trade balance, bn JPY, YTD Current-account balance, bn JPY, YTD Exchange rates (USD/JPY) Budget balance (% GDP) -8.0% -7.3% 3-month LIBOR JPY, %, end of term % % % % -0.65% -0.77% 10-year government bonds %, end of term -0.23% -0.08% 0.06% 0.09% 0.08% 0.08% Sourcce: MarketIntello 14

18 Appendix 2: Vietnam s major macroeconomic indicators Real economy Q2 T GDP growth (2010 price), YoY % 5.42% 5.98% 6.68% 6.21% 5.73% Inflation, end of period, YoY % 6.04% 1.84% 0.60% 4.74% 2.54% 2.52% Core inflation, end of period, YoY % 2.90% 1.69% 1.87% 1.29% 1.30% Retail and Service revenue growth (excluding price effect), YoY % 5.60% 8.10% 8.40% 7.80% 10.1% 10.0% Industrial Production Index growth, YoY% 7.03% 9.61% 8.96% 7.79% 8.92% 8.10% Total investment, YTD, 000 bn VND Number of registered FDI projects, YTD Implemented FDI investment, YTD, bn USD Government sector Government budget: Revenue, YTD, 000 bn VND Government budget: Expenses, YTD, 000 bn VND Government budget balance, YTD, 000 bn VND Budget deficit/gdp, YTD, % -6.6% -6.3% -6.11% -5.52% Public debt/gdp, YTD, % 54.5% 58.0% 62.2% 64.7% Foreign debt/gdp, YTD, % 37.3% 38.3% 41.5% - Public foreign debt/gdp, YTD, % 21.3% 20.6% - Enterprise s foreign debt/gdp, YTD, % 16.0% 17.7% Government bonds raised, 000 bn VND Winning/Offering ratio, % 52.6% 72.9% 66.7% 78.5% 89.1% - 5-year government bond yield, end of term, % 7.8% 5.4% 6.5% 5.4% 4.7% External sector Current account balance, bn USD Goods balance, YTD, bn USD Goods export, YTD, bn USD (fob) Goods import, YTD, bn USD (fob) Services balance, YTD, bn USD Net investment income, YTD, bn USD Net transfer, YTD, bn USD Capital balance, YTD, bn USD Financial balance, YTD, bn USD Net foreign direct investment, YTD, bn USD Net foreign portfolio investment, YTD, bn USD Other investment, YTD, bn USD Net Errors & Omissions, YTD, bn USD Overall balance, YTD, bn USD SBV Foreign Reserves (excluding Gold) change, end of term over end of last year, bn USD Monetary sector Exchange rate, end of period, VND/USD month deposit interest rate, end of period, % 6.69% 4.92% 4.68% 4.80% 4.8% 4.8% Over-night interbank rate, end of period, % 3.37% 2.22% 4.90% 3.23% 1.47% 0.48% M2 growth, end of period, YoY % 18.85% 17.69% 16.23% 18.38% 15.46% Outstanding deposits and bonds growth, YoY % 19.92% 16.96% 16.21% 19.16% 15.65% Domestic credit growth, YoY % 13.01% 14.16% 17.26% 18.25% 19.18% Net withdrawal, YTD, 000 bn VND Note: shaded values are estimated Source: MarketIntello 15

19 % yoy USD Annual average (%GDP) VND/USD USD % yoy project mn USD % yoy %yoy MACROECONOMIC INDICATORS 10% 8% Real gdp growth Ouput gap (*) GDP growth Potential GDP growth 30% 25% CPI inflation CPI growth Core inflation 6% 4% 2% 0% -2% 20% 15% 10% 5% 0% -5% Annually Industrial production indicators Foreign direct investment 24% 20% 16% 12% 8% 4% 0% -4% -8% IPI (left axis) PMI (right axis) growth rate increases contraction rate increases Newly registered capital (right axis) Implemented capital (right axis) No. new projects (left axis) % % 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% Current account balance Current account balance Good and service balance Income and transfer balance Foreign reserves and exchange rate Foreign reserves (excl. gold) VND/USD Exchange rate 40 Bn 35 Bn 30 Bn 25 Bn 20 Bn 15 Bn 10 Bn Quarterly 20 Bn 15 Bn 10 Bn 5 Bn Bn Foreign goods trade Exports value Imports value Trade balance 60% 50% 40% 30% 20% 10% Money supply and inflation M2 growth 3-month deposit interest rate Consumer Price Index: YoY MACROECONOMIC INDICATORS -5 Bn 0% -10% Published by Market Intello on 08/01/2017 * Output gap : economic measure of the difference between the actual output of an economy and its potential output, showing whether the economy is overworking or underworking its resources. A positive output gap occurs when actual output is more than full-capacity output, and a negative gap means that there is spare capacity, or slack, in the economy due to weak demand. Vietnam's output gap is estimated using the production approach and HP filtering.

20 % % % % yoy % % yoy % % MACROECONOMIC INDICATORS Money supply, credit and deposit growth Loan-to-deposit ratio (LTD) and interest rate 90% 80% 70% 60% 50% 40% 30% 20% M2 growth Credit growth Deposit growth 125% 120% 115% 110% 105% 100% 95% 90% LTD (left axis) 3-month deposit interest rate % 85% 2 0% 80% 0 50% 40% 30% Credit growth by sector Agriculture, Forestry & Fishery Industry & Construction Trade, Transport & Telecom Other Services 15% 14% 14% Capital adequacy ratio (CAR) of Vietnam financial institutions 20% 13% 10% 13% 0% 12% -10% 12% Government bond yield curve Government bond yield 10% 25% 9% 8% 7% 20% 1 year 2 year 3 year 5 year 10 year 6% 15% 5% 4% 3% 2% 1% 0% Q Q Q Q Q year 2 year 3 year 5 year 10 year 10% 5% 0% Interbank rate 20% 16% Overnight 1-month 3-month 9-month 12% 8% 4% 0% Published by Market Intello on 08/01/2017

21 Abbreviations ASEAN Association of Southeast Asian Nations Brexit Great Britain s vote to exit the European Union CPI Consumer Price Index CNY China Renminbi ECB European Central Bank EU European Union EUR Euro FDI Foreign Direct Investment FED Federal Reserve System FRED Federal Reserve Economic Data GBP Great Britain Pound GDP Gross Domestic Product IPI Industrial Production Index MoM Month over month ODA Official Development Assistance OECD Organization for Economic Cooperation and Development PMI Purchasing Manager Index Q1, Q2 First quarter, second quarter USD US dollard VCB Vietcombank VND Vietnam Dong YoY Year over year YTD Year to date 16

22 Disclosure appendix Analyst Certification The following analysts who are primarily responsible for this report, certify that all the opinions and forecasts expressed herein accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Dinh Tuan Minh, Hoang Minh Tri and Phan Huy Hoang. This report has been prepared and distributed by Marketintello and the Development and Policies Research Center (DEPOCEN), intended solely for the clients of Marketintello and not for profit or for offering any products mentioned in the report. The recommendations in this report are suggestions and should not be considered as advice for any individual, as the reporting is not intended to serve personal interests. Therefore, investors should consider the validity of these recommendations in their respective situation before making any actions based on them. Additional disclosures The report were published on 08/15/2017. The economic data and market reports were updated on 07/30/2017 and any exception will be specifically mentioned in the report. All information given in the analysis has been collected and examined as carefully as possible. However, due to subjective and objective reasons from published sources, the authors are not legally responsible for the authenticity of the information mentioned in this report. For more information, please contact: Marketintello Room , 12 Trang Thi, Hanoi, Vietnam Website: 17