Vietnam. HSBC Global Connections Report. October 2013

Transcription

1 HSBC Global Connections Report October 2013 Vietnam The pick-up in GDP growth will be modest this year, with weak domestic demand and exports still dampening industrial confidence. A stronger recovery is forecast for as lower interest rates and reduced stocks prompt domestic investment, exports pick up and this year s higher FDI commitments start to flow. Although the Trade Confidence Index was at a four-year low in H1 2013, we expect trade flows to gradually pick up in H Almost half of the respondents to the HSBC Trade Confidence Survey expect trade volumes to improve in the next six months. The authorities are committed to modernising the economy and improving its infrastructure. Over the next 20 years the proportion of imports related to infrastructure will rise to over half, much of this investment equipment. The longer-term outlook is bright. Long-term growth of 5% pa is expected, helped by the strong footholds Vietnam has in the clothing and apparel and ICT equipment markets. Top Five Export Destinations* Rank USA China 2 China USA 3 Japan Malaysia 4 Korea Korea 5 Germany Japan Vietnam has strong links with the USA and Europe. Risks to export growth from the Chinese and EU slowdowns are partly offset by improving regional opportunities and the USA recovery. *The table considers goods exports between the 23 countries in the sample.

2 Equipping for growth Why infrastructure is important Vietnam s infrastructure is in urgent need of improvement. Upgrading and expanding the transport and communications network is essential to supporting long-term GDP growth in excess of 5% pa. Vietnam is ranked outside the world s top 100 countries for its infrastructure by the World Economic Forum. But progress is being made: the HSBC Asia Infrastructure Measure (AIM) for Vietnam has risen from less than 0.28 in 2000 to 0.37 last year (Korea is rated 1.04). Within 20 years more than half of Vietnam s total imports will reflect goods for infrastructure and investment equipment. Indeed by 2030, more than a third of imports will come from investment equipment alone, up from less than a quarter in As the country continues to develop, our forecast indicates that Vietnam will continue to import twice as many infrastructure goods (by value) than it exports. Private sector participation is low in Vietnam relative to many of Vietnam s neighbours, but the government is introducing reforms to improve this, so gradually the funding constraints that 16% of the HSBC TCI Survey respondents cited as a barrier to trade will ease. Equipping for growth % year Growth The investment countries are making in infrastructure is phenomenal and provides a huge opportunity for businesses looking to grow and develop. Rising middle classes across Asia s rapidly emerging markets will drive significant infrastructure demand in the region. As China looks to scale the value chain in terms of the goods it manufactures, there is a strong opportunity for developed economies to supply sophisticated investment equipment to the country s producers. We expect infrastructure-related goods to increase their share of rising global trade, providing strong opportunities across both developed and emerging economies for exporters and importers of those goods and the merchandise that can be manufactured as a result. James Emmett HSBC Global Head of Trade and Receivables Finance 16% 14% 12% 1 8% 6% 4% 2% Exports Goods for infrastructure Investment equipment Imports Total goods trade Total imports and exports are the sum of imports and exports from the modelled countries

3 Short-term snapshot Having stuttered in the year to date on subdued global demand, trade flows are expected to gradually pick up in H Nearly half of Vietnam s exports currently go to the advanced economies, a higher proportion than in neighbours Indonesia, Malaysia and Bangladesh. This should help Vietnam recover, as demand is accelerating in the advanced economies, particularly in the USA, Vietnam s largest export partner. HSBC Trade Confidence Index Vietnam s more subdued trade flows this year are reflected in a lower HSBC Trade Confidence Index of 108 in H1 2013, the lowest since H Nevertheless, almost half of the respondents to the HSBC Trade Confidence Survey indicated that trade volumes should improve in the next six months, helped by recovery in the USA. 140 Region to region trade Positive Neutral Asia Europe North America Middle East and North Africa Latin America 80 1H09 2H09 1H10 2H10 1H11 2H11 1H12 2H12 1H13 Source: HSBC TCI data Negative Cross border business Clothing and apparel is Vietnam s largest export sector, helped by wage competitiveness. This sector will contribute 2 of the increase in exports out to Since signing a bilateral trade agreement with the USA in 2000 and joining the WTO in 2007, Vietnam has become the second largest supplier of clothing and footwear to the USA behind China. Exports of clothing and apparel to the USA and Europe are expected to grow at a doubledigit pace from Corridors of choice Despite slowing recently, emerging economies will still support an expansion of trade. Nearly a quarter of respondents cited Southeast Asia as the most promising region for trade. Trade within Southeast Asia has been boosted by greater regional cooperation marked by a large number of free trade agreements. The currency of choice for trade is overwhelmingly the USA dollar, identified by over 92% of respondents. But currency volatility is a key concern for traders. Opportunities for business As the middle class expands, Vietnam s imports will become increasingly consumer-orientated. We expect rising FDI inflows to support investment in the next few years, as foreign companies seek to access Vietnam s large domestic market and substantial infrastructure development needs.

4 Long-term outlook Vietnam is located in the world s most dynamic trading region and has established a strong foothold in clothing and apparel and in telecoms. The demographic trend is very favourable and we expect long-term growth of more than 5% pa. Corridors to watch A rising middle class across Asia will help to drive strong trade flows from Vietnam to the rest of emerging Asia. The ASEAN-China Free Trade Area (ACFTA) will pay dividends, with Vietnam s exports to the rest of Asia (excluding Japan) growing by more than 15% pa in China is expected to be Vietnam s fastest growing destination for exports out to 2030 but India and Bangladesh will be Vietnam s fastest growing import partners with industrial machinery being the largest import sector. Trade between Vietnam and Malaysia will also become increasingly important. Malaysia s fast growth in the same headline sectors, notably industrial machinery and ICT equipment, will contribute to exports from Vietnam to Malaysia growing by more than 15% pa in Less than 5% of the HSBC TCI Survey respondents said that trade in the Middle East or Latin America, a smaller proportion than many of Vietnam s neighbours, reflects the importance of the USA and Europe as trading partners. The USA is still expected to rank as Vietnam s second largest export partner by 2030 behind China. Sector contribution to increase in merchandise exports Focus on infrastructure Although Vietnam s infrastructure is still ranked poorly, progress is being made. HSBC s Asia Infrastructure Measure (AIM) improved from under 0.28 in 2000 to 0.37 in In 2013 more than 4 of imports will be infrastructure-related and by 2030 this share will rise to around 6. Much of the increase will come from higher demand for investment equipment and by 2030, more than a third of imports will come from investment equipment alone, up from less than a quarter in As the country continues to develop, our forecast indicates that Vietnam will continue to import twice as many infrastructure goods (by value) than exports. The majority of funding for infrastructure projects comes from the government or overseas development assistance. In the HSBC TCI Survey, 16% of respondents said credit availability is a barrier to trade. The government is introducing reforms to encourage more private sector participation in the economy, which should bear fruit over the longer-term Conclusion Vietnam has attracted sharply higher investment flows in recent years as businesses have been drawn by its vast population, cost competitiveness and location within dynamic emerging Asia. Demographic trends are favourable and investment is increasingly aimed at services and consumer products to take advantage of the expanding young market Food & animals Beverages & tobacco Raw materials Source: Oxford Economics Mineral fuels Chemicals Manufactures Machinery & transport Other

5 About the data: About the HSBC Global Connections Report Modelled by Oxford Economics: Oxford Economics has tailored a unique service for HSBC which forecasts bilateral trade for total exports/imports of goods, based on HSBC s own analysis and forecasts of the world economy, to generate a full bilateral set of trade flows for total imports and exports of goods and balances between 180 pairs of countries. Oxford Economics produces a global report for HSBC, plus regional reports and country specific reports on the following 23 countries: Hong Kong, China, Australia, Indonesia, Malaysia, India, Singapore, Vietnam, Bangladesh, Canada, USA, Brazil, Mexico, Argentina, UK, France, Turkey, Germany, Poland, Ireland, UAE, Saudi Arabia, and Egypt. Oxford Economics employs a global modelling framework that ensures full consistency between all economies, in part driven by trade linkages. The forecasts take into account factors such as the rate of demand growth in the destination market and the exporter s competitiveness. Exports, imports and trade balances are identified with both historical estimates and forecasts for the periods , and The model looks at two-digit classifications from the COMTRADE database, grouped into a set of thirty headings. The sector data has been tracked by country, to give an insight into the primary drivers of trade between the 25 countries and territories in the sample. The sector data has been calculated to show growth as a percentage of the overall contribution to growth, to ensure that the model highlights the sectors which are representing the biggest drivers of growth. More information about the sector modelling can be found on: Oxford Economics formerly Oxford Economic Forecasting was founded in 1981 to provide independent forecasting and analysis, tailored to the needs of economists and planners in government and business. It is now one of the world s leading providers of economic analysis, advice and models, with over 500 clients. Oxford Economics commands a high degree of professional and technical expertise, both in its own staff of over 70 professionals based in Oxford, London, Belfast, Paris, UAE, Singapore, Philadelphia and New York, and through its close links with Oxford University and a range of partner institutions in Europe and the USA. About the HSBC Trade Confidence Index: The HSBC Trade Confidence Index is conducted by TNS on behalf of HSBC in a total of 20 markets, and is the largest trade confidence survey globally. The current survey comprises sixmonth views of 5,800 exporters, importers and traders from small and mid-market enterprises on: trade volume, buyer and supplier risks, the need for trade finance, access to trade finance and the impact of foreign exchange on their businesses. The fieldwork for the current survey was conducted between May June 2013 and gauges sentiment and expectations on trade activity and business growth in the next six months. Equipping for growth Methodology: This report looks at the key industry sectors that contribute to an economy s productive capacity. This will include not only trade in the intermediate goods required for infrastructure projects, but also trade in the investment equipment required by businesses to boost production. It collects key investment-related sub-sectors into two groups, defined as intermediate goods for infrastructure and investment equipment. As the sectoral trade forecasts are based on the UN s Standard International Trade Classifications at the two-digit level, this does present some issues in accurately defining the sub-sectors that contribute to investment, due to broad sectoral definitions. Intermediate goods for infrastructure: 66 Non-metallic mineral manufactures 67 Iron and steel 68 Non-ferrous metals 69 Manufactures of metals 76 Telecoms equipment 81 Prefabricated buildings 79 Other transport equipment Investment equipment: 71 Power-generating machinery and equipment 72 Machinery specialised for particular industries 73 Metalworking machinery 74 General industrial machinery and equipment 75 Office machines and automatic data-processing machines 77 Electrical machinery, apparatus and appliances 87 Professional and scientific instruments Based on the same underlying forecasts used for the existing analysis of trends in bilateral trade flows, the report examines how exports/imports of these two aggregates are expected to evolve over time. The import forecasts for these aggregates will be linked to the underlying investment requirements of the economy, while the export forecasts will be linked to the economy s ability to produce the investment goods required by other nations. About HSBC Bank plc Headquartered in London, HSBC is one of the largest banking and financial services organisations in the world. HSBC is one of the world s most international commercial banks with over three million customers in more than 60 markets. For more information please see: This document is issued by HSBC Bank plc. It is not intended as an offer or solicitation for business to anyone in any jurisdiction. It is not intended for distribution to anyone located in or resident in jurisdictions which restrict the distribution of this document. It shall not be copied, reproduced, transmitted or further distributed by any recipient. The information contained in this document is of a general nature only. 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