Economic growth in Vietnam was little changed in the second quarter as a crippling drought hurt farming output and demand for exports weakened.
Gross domestic product rose 5.6 percent from a year earlier after expanding 5.5 percent in the previous three months, the General Statistics Office said in a statement in Hanoi on Tuesday. The economy expanded 5.52 percent in the first half of the year, lower than the 5.8 percent median estimate of four economists in a Bloomberg News survey.
As the world’s biggest producer of robusta coffee and a major exporter of rice, the worst drought in three decades is weighing on Vietnam’s economy this year. The longer-term outlook remains good though as the nation benefits from a manufacturing industry that’s grown in importance over the years after companies such as Samsung Electronics Co. set up plants there to export smartphones.
“We are still optimistic,” said Long Ngo, a research manager at Viet Capital Securities JSC in Ho Chi Minh City. “Given all the challenges that we are facing now, like the sell-off in the emerging-markets, export markets are slowing down and the zero growth in agricultural production, Vietnam is still doing quite well. We are still outperforming other countries in the region.”
Agriculture output dropped 0.8 percent in the first six months of the year compared with the same period in 2015, the statistics office said. That was offset by a 10 percent jump in manufacturing and strong growth in construction and services.
“We expect growth to be buoyed in the second half on higher manufacturing output as the government is trying to help companies with more lending and steps to boost demand,” Nguyen Bich Lam, head of the statistics office, told reporters in Hanoi. The economy needs to expand 7.6 percent in the second half in order to meet the government’s target of 6.7 percent expansion this year, he said.
The central bank last month delayed tightening its lending rules to help spur investment in the economy. The International Monetary Fund is forecasting growth of about 6 percent this year “reflecting the adverse agriculture shock, lower external demand and spillovers of tighter global financial conditions,” it said in a statement on Monday.
Growth in exports slowed to 3.3 percent in June from 4.9 percent in the previous month, official data shows. Rice shipments in the world’s third-largest exporter of the grain is down 6.8 percent in the first half of the year compared to the same period in 2015, according to the statistics office.
“Despite the slowdown, growth of 5.5 percent still makes Vietnam one of the top-performing economies in the region,” Gareth Leather, senior Asia economist at London-based Capital Economics Ltd., said in an e-mailed note to clients. “We think the prospects remain bright. Once weather patterns return to normal, agricultural output should start to recover.”