The macroeconomic outlook is solid. Growth has been driven by the recovery in global trade, strong manufacturing activity, robust foreign investment and steady domestic demand. Annual growth is projected to average over 6% over the next four years, due to firming global and domestic demand. Accelerating wage growth will support household spending, while ongoing deregulation will promote greater private investment.
Vietnam’s participation in the TPP trade agreement will add further upside to the outlook, particularly given its strong competiveness in low cost manufacturing. But the growing risk of a global trade war will temper any optimism. Over the long term, Vietnam’s youthful population and low dependency ratio, along with its increasing shift into manufacturing, will drive growth. But the reliance on large, inefficient state-owned enterprises poses downside risks.