Analyses & Etudes

Vietnam economy to become larger than Singapore’s in 10 years: DBS Bank

Vietnam’s economy could surpass Singapore’s by 2029 thanks to rising foreign investment and productivity growth, the Singaporean creditor says.

 

The country’s economy is now worth around $224 billion against Singapore’s $324 billion, and the former averages 6-6.5 percent growth and the latter, 2.5 percent. Rising FDI is one of the reasons for the growth, the bank said in a report. 

Vietnam's registered FDI in the first five months of the year was $16.74 billion, up almost 70 percent year-on-year. Disbursed FDI was estimated at $7.3 billion, up 7.8 percent, according to its Ministry of Planning and Investment (MPI).

The country has been attracting plenty of investment in electronics manufacturing. Samsung, Intel, LG, Panasonic, and Microsoft are among the global tech giants that have expanded robustly in the country.

"Global investors have been lining up to be a part of the Vietnam narrative," the DBS Bank report said. "Strong FDI from China and Hong Kong in the first four months of this year may well mark the beginning of a new trend."

A number of companies are leaving China for Southeast Asia including Vietnam to dodge tariffs given the escalating U.S.- China trade spat. MPI data shows that in the first five months of the year Hong Kong led with $5.08 billion, making up 30.4 percent of Vietnam's overall registered FDI, followed by South Korea and Singapore. The registered FDI includes newly-registered capital, capital supplements and stake acquisitions.

DBS Bank cited Vietnam’s growing labor productivity as another reason. The country still has among the most competitive wages in the region. "Its monthly wage of around $250 is one-third of China’s and only 8.5 percent of Singapore’s." 

According to the World Bank, its productivity growth of 5.7 percent in 2015-17 outpaced other Southeast Asian countries and was second only to China at almost 7 percent.

DBS Bank added that the country is also investing heavily into infrastructure to support the rapidly growing economy. The investment, focused on areas such as economic zones, industrial parks and hi-tech parks, is expected to attract more FDI flows.

Vietnam's infrastructure spending as a percentage of GDP in 2017 was 5.8 percent, higher than most of its neighbors, according to the Asian Development Bank.

Vietnam’s GDP grew at 7.08 percent last year, the highest in a decade, according to its General Statistics Office.

Source: VN Express

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