As anticipation builds for the upcoming regional UOB conference titled “Gateway to ASEAN” in Ho Chi Minh City on September 6, insightful perspectives are already emerging. Mr. Suan Teck Kin, Head of Research at UOB, recently discussed the region’s robust economic landscape, spotlighting Vietnam’s pivotal role as a destination with promising prospects on the horizon.
ASEAN’s Strong Resilience
In today’s fluctuating global markets, ASEAN stands out for its ability to withstand recession risks, showcasing impressive growth while maintaining inflation levels significantly lower than those in major economies like the G3. Despite facing various macroeconomic challenges—from a slow global economy and rising inflation to volatile commodity prices and geopolitical tensions—the Asian Development Bank (ADB) forecasts a steady 5 percent growth for ASEAN in 2024. This growth trajectory is consistent with the region’s performance over the past decade, underscoring its economic stamina.
Several factors underscore ASEAN’s rise to prominence. Chief among them is its demographic advantage, featuring a youthful population of nearly 700 million and a burgeoning middle class. Additionally, the region’s strategic geographic positioning at the crossroads of key trade routes facilitates an astonishing $3.4 trillion in global trade annually.
Mr. Suan highlighted that while ASEAN acts as a significant trading bloc, much of its trade occurs outside the region. In 2022, ASEAN’s trade volume reached approximately $3.8 trillion, with a sizeable 80 percent involving non-ASEAN countries. In contrast, the European Union boasts a higher intra-bloc trade share of 80 percent. This reflects ASEAN’s global integration, especially with dominant economies like China and the United States.
Interesting shifts in U.S. trade dynamics further bolster ASEAN’s position. Since 2016, the share of U.S. imports from China has dropped from 21 percent to 13 percent, while imports from ASEAN have increased from 7 percent to around 11 percent. Notably, Vietnam has experienced a substantial rise, nearly doubling its share of U.S. imports.
Another key driver is the reorientation of Chinese trade away from the U.S. and Europe, which has inadvertently benefitted ASEAN. Now the largest trading partner for China, ASEAN has overtaken both the EU and the U.S. in trade relations, marking a significant shift toward stronger economic ties between China and Southeast Asia.
These developments illustrate a meaningful restructuring of global trade patterns, with ASEAN emerging as a vital player in global supply chains, particularly as international businesses pivot away from dependency on China.
Vietnam: The Rising Star
In this vibrant regional landscape, Vietnam shines as a “Bright Star” within ASEAN, boasting a formidable economic growth rate sustained over the years despite global fluctuations.
Vietnam’s economy is characterized by resilience, with a promising growth outlook for 2024 backed by increasing foreign direct investment (FDI) and an impressive trade surplus. Recent data from the General Statistics Office reported that Vietnam’s GDP growth for the second quarter of 2024 hit 6.93 percent, surpassing expectations and outpacing earlier quarters.
This robust economic performance is supported by vigorous manufacturing activity alongside a recovering trade sector. Both the manufacturing and service sectors exhibited notable growth, collectively accounting for three-quarters of Vietnam’s GDP. In particular, the manufacturing sector experienced a 10 percent year-on-year increase in the second quarter of 2024, while the services sector enjoyed a 7.1 percent growth during the same period.
The foreign trade picture remains strong, with momentum in semiconductor sales likely to carry into the second half of the year. Exports and imports have both seen significant year-on-year increases, recorded at 14.0 percent and 16.6 percent, respectively, in the first half of 2024.
Moreover, Vietnam’s FDI climate is vibrant, achieving record highs for two consecutive years. During the first seven months of this year alone, Vietnam attracted $13 billion in FDI, with substantial investments pouring in from Singapore, China, Hong Kong, and Japan. Mr. Suan remarked that this trend underscores ongoing investor confidence in Vietnam’s potential and competitive landscape.
Despite facing geopolitical risks, semiconductor market fluctuations, and uncertainties regarding China’s economic recovery, international forecasts from organizations such as UOB, the ADB, the International Monetary Fund (IMF), and the World Bank indicate positive growth for Vietnam. Projections estimate growth rates between 6.0 to 6.5 percent for the fiscal year 2024, recovering from a previous 5.0 percent in FY 2023, positioning Vietnam among the fastest-growing economies in the ASEAN bloc.
In the long term, Vietnam’s growth trajectory is underpinned by encouraging demographic and macroeconomic trends. The nation is witnessing a burgeoning middle class and holds the distinction of being the third most populous country in ASEAN, with around 100 million residents ready to contribute to future consumer spending.
From a macroeconomic standpoint, Vietnam is transitioning from a focus on low-cost manufacturing to higher value-added technologies, placing greater emphasis on sectors like services, retail, and tourism. These positive long-term fundamentals have helped Vietnam’s economic share in ASEAN nearly double from less than 6 percent in 2000 to around 12 percent today.
To delve into growth and investment opportunities for companies within ASEAN and Vietnam, UOB is set to host the annual “Gateway to ASEAN” conference, themed “ASEAN: Crossroad to The World,” on September 6 at the Thisky Hall Sala Convention Center, located on the 5th floor of Grand Skylar in Ho Chi Minh City. This marks the first year the conference is being held in Vietnam.
The conference is expected to gather prominent figures from Vietnamese ministries, agencies, and leading enterprises across the region. UOB, recognized for its expansive trade network in ASEAN, plays a vital role in fostering connections and promoting sustainable development across the region. By leveraging its extensive regional presence and deep local insights, UOB remains committed to delivering comprehensive financial solutions to help businesses capitalize on growth opportunities in this dynamic economic landscape.
The live coverage of the conference will be available on VnEconomy’s official Facebook page, starting at 9:15 AM on September 6. For more details, visit this link.