Vietnam factories' trade war boost could ease in 2020: Citi

A vendor selling stuffed toys and Christmas outfits in Hanoi. Vietnamese factories' output of toys nearly quadrupled year on year in Q4, amid US-China trade war diversion.
DECEMBER 30, 2019 - 2:26 PM

THE lift to Vietnam’s economy from the US-China trade war may ease in 2020, economists have cautioned, although cushions to a growth slowdown are still in play.

The manufacturing boost from supply-chain shifts into Vietnam could yet narrow on capacity limits, as well as concern over possible backlash from the United States, according to a flash note by Citi analysts Ang Kai Wei and Johanna Chua.

For instance, Vietnam has been pressed to crack down on “made in Vietnam” labelling violations. That’s even as the US and China, which made up about two-fifths of Vietnam’s exports in the first 11 months of 2019, are expected to post weaker growth in the coming year.

Even with Vietnam clocking strong production growth for goods - such as toys, electronic parts and furniture - that have been hit by US tariffs on Chinese imports, the country’s gross domestic product growth is expected to cool to 6.7 per cent in 2020, slipping from 7 per cent in 2019.

“That said, we do not expect growth to deteriorate too sharply,” the analysts added, citing companies’ commitment to expanding factory capacity, the expected pick-up in global semiconductor trade, and the policy rate cuts made in recent months.