HSBC sees robust Vietnam export growth

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HSBC expects improved demand in the US and EU coupled with new investments in manufacturing to help Vietnam accelerate exports this year.

In its January monthly report on the Vietnamese economy, titled "2014: the Year of Exporters," the bank expects Vietnam to be among the countries benefiting most from recovering western demand in the coming years thanks to its export-dependent economy.

The increased demand in the US and the EU, which account for 18 percent and 14 percent of Vietnam's exports, will help exports grow at 20 percent this year from 15.4 percent in 2013.

Strong exports will also be due to the sharp increase in foreign direct investment last year, a great deal of which flowed into manufacturing. FDI rose by more than half to US$21.6 billion.

The export surge will boost economic growth to 5.6 percent this year from 5.4 percent in 2013.

The country, which had persistent trade deficits for years, reported a surplus of $900 million last year following a marginal surplus in 2012.

But it was also a sign of weak domestic demand, which is likely to remain lackluster due to the overhang of bad debts.

The government might raise the cap for foreign stakes in companies excluding banking to 60 percent from the current 49 percent to attract capital inflows.

While this is a "positive step," further economic reforms are necessary to address bottlenecks in the economy, including high levels of non-performing loans, which will otherwise continue to perform below potential.

The bank's Purchasing Managers' Index last month sharply rose to 51.8 from 50.3. A figure above 50 means expansion.

A strong rise in "employment" reflects the country's competitiveness in labor-intensive manufacturing.

Consumer prices rose by 6.6 percent last year, down from more than 9 percent in 2012.

There are likely to be further hikes in the prices of electricity and fuel, taking inflation to around 7.9 percent this year.

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