Asia Economy

Vietnam's outlook is 'one of the brightest' in Asia, UBS says

Key Points
  • A rebounding economy and a new trade deal are reasons why the outlook for Vietnam is positive despite the coronavirus pandemic, said Edward Teather of UBS Research.
  • "Retail sales, imports (and) industrial production were all actually up on the year in the month of June, which is better than you can say for most economies in the region," he said.
  • Vietnam was successful in containing its Covid-19 outbreak and has reported 369 cases in a population of under 100 million.

In this article

Vietnam has 'plenty of activity' in its foreign direct investment pipeline: UBS
VIDEO2:5902:59
Vietnam has 'plenty of activity' in its foreign direct investment pipeline: UBS

Vietnam is among the "brightest" spots in Asia despite the challenge of trying to contain the coronavirus pandemic — and its economy is poised to rebound, a UBS economist said this week.

"Vietnam is suffering some pain from the impact of Covid-19, but the outlook is looking one of the brightest in the region," said Edward Teather, Asean economist at UBS Research.

"Retail sales, imports (and) industrial production were all actually up on the year in the month of June, which is better than you can say for most economies in the region," he told CNBC's "Squawk Box Asia" on Monday.

Many economies contracted in the second quarter of 2020 compared to a year ago, but Vietnam's gross domestic product grew slightly at an estimated 0.36%.

A woman leaves a cosmetics store in Hanoi, Vietnam on July 6, 2020.
Nhac Nguyen | AFP | Getty Images

The country was successful in containing its coronavirus situation even though it shares a border with China, where the virus outbreak was first reported.

Vietnam has reported 369 cases and no deaths so far, according to data compiled by Johns Hopkins University. The country has for a population of under 100 million.

"Vietnam is growing and is well-positioned to continue to take global market share in terms of exports going forward, so pretty bright prospects in a relative sense in the region," Teather said.

The nation is seen as an alternative manufacturing hub for companies that want to shift production out of China due to tensions between Beijing and Washington that have resulted in rising tariffs.

Vietnam has zero coronavirus deaths. Here's why.
VIDEO7:4007:40
Vietnam has zero coronavirus deaths. Here's why.

Boost to the economy

The country's free trade deal with the European Union, which was ratified last month, could boost inflows of foreign direct investment, Teather said.

Overall FDI levels are likely to be hindered, in part because investors cannot travel freely, he predicted. However, there is "plenty of activity" in the pipeline, and those investments could pick up in 2021 as border restrictions are eased.

Government support may also boost Vietnam's economy, he said. "The prime minister just over the weekend was calling for more measures to support the economy, and the central bank was actually saying they want to get credit growth up over 10%."

"It does look as if the authorities, having got some momentum are pushing further," he added.