PP 7767/09/2010(025354)

Vietnam
Economic Highlights
•
MARKET DATELINE

1 July 2010

Economic Activities Remained Strong In June

◆ . Vietnam’s industrial production strengthened to 14.6% yoy in June, from +13.8% in May and +13.0% in

April. This was the strongest growth five months, suggesting that industrial activities picked up on the back of a
stronger growth in exports. As a result, output of the non-state and FDI sectors grew at a faster pace in June.
These were, however, offset partially by a slowdown in output of the state sector during the month.

◆ Exports also grew at a stronger pace of 15.7% yoy in January-June 2010, compared with +12.6% in the
first five months of the year and -10.1% in the corresponding period of 2009, indicating that Vietnam’s exports
continued to benefit from a sustained increase in global demand. Imports, however, moderated to 29.4% yoy
in January-June, from +29.8% in January-May, suggesting that exports may turn softer, while domestic demand will
likely remain resilient in the months head.

◆ Retail sales, however, moderated to 26.7% yoy in January-June, from +26.9% yoy in January-May and
compared with +20.0% in the corresponding period of 2009. This suggests that consumer spending has eased
somewhat during the month.

◆ Vietnam’s headline inflation, on the other hand, grew at a slower pace of 8.7% yoy in June, compared
with +9.1% in May and after reaching a peak of +9.5% in March. This was the third consecutive month of
moderation, suggesting that price pressure is easing. This, coupled with prospects of a slowdown in global economy,
suggests that the State Bank of Vietnam will probably not raise its key policy rate in the near term.

◆ As a whole, the key economic data in June suggest that economic activities had improved in the 2Q,
after recording a growth of 5.8% yoy in the 1Q. Indeed, the General Statistics Office of Vietnam reported that the
country’s economy grew at a faster pace of 6.2% yoy in 1H 2010, compared with +5.8% in the 1Q. Going forward,
we believe the Vietnamese economy will likely expand at a faster pace of 6.4% in 2010, compared with
+5.3% in 2009.

Vietnam’s industrial production strengthened to 14.6% yoy in June, from +13.8% in May and +13.0% in April
(see Table 1). This was the strongest growth in five months, suggesting that industrial activities picked up on the back
of a stronger growth in exports. As a result, output of the non-state sector grew at a faster pace of 14.4% yoy in June,
compared with +11.4% in May and +10.9% in April. This was aided by a pick-up in production of the FDI sector, which
inched up to 19.3% yoy in June, the second consecutive month of picking up and from +19.2% in May. The pick-up
was on account of a smaller decline in the oil & gas output, while the production of non-oil & gas related products
moderated slightly during the month. These were, however, offset partially by a slowdown in output of the state sector,
which eased to 6.9% yoy in June, from +8.2% in May. This was the second consecutive month of slowing down, attributed
to slower increase in output of the centrally-managed sub-sector, which was mitigated by a pick-up in output of the locally-
managed sub-sector. Mom, industrial production eased to 2.2% in June, the third straight month of easing and from
+3.3% in May, indicating that factory output is losing momentum.

Peck Boon Soon

(603) 9280 2163
Please read important disclosures at the end of this report.
bspeck@rhb.com.my

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 1 July 2010

Table 1
Industrial Output at Contant 1994 Prices
2009 2010
Sep Oct Nov Dec Jan Mar Apr May Jun YTD
%yoy
Total 13.8 11.9 13.0 13.4 28.4 14.0 13.0 13.8 14.6 13.6
State Sector 8.5 6.8 6.1 6.5 23.1 5.1 8.7 8.2 6.9 9.5
Centrally Managed 9.8 9.6 8.4 8.6 24.9 7.9 11.5 10.9 7.8 12.7
Locally Managed 3.1 -4.0 -2.8 -1.6 16.2 -3.9 -2.0 -1.8 3.2 -3.3
Non-state Sector 16.5 15.7 17.3 17.0 31.1 14.4 10.9 11.4 14.4 12.6
FDI Sector 15.0 12.1 13.9 14.9 29.1 18.8 17.6 19.2 19.3 17.0
Oil and Gas 15.9 2.1 -3.3 -8.6 -16.6 10.7 -10.3 -4.1 -3.6 -7.3
Other 14.9 13.3 16.1 18.2 36.7 19.8 21.6 22.4 22.2 20.5

Source : The General Statistics Office of Vietnam

Exports also grew at a stronger pace of 15.7% yoy in

Table 2 External Trade
January-June in 2010 (see Table 2), compared with +12.6%
in the first five months of the year and -10.1% in the Exports Imports Trade
corresponding period of 2009, indicating that Vietnam’s exports Balance
continued to benefit from a sustained increase in global (YTD, % yoy) (YTD, US$m)
demand. This was underpinned by stronger growth in
domestic companies’ exports and a rebound in exports of ‘09 J-Mar 2.4 -45.0 1,647
multinational companies during the month. A turnaround in J-Jun -10.1 -34.1 -2,108
the exports of rice (+0.4% yoy in January-June versus - J-Sep -14.3 -24.9 -6,542
3.0% in January-May) and a pick-up in the exports of cashew J-Dec -9.7 -14.7 -12,246
nuts and tea helped (see Table 3). These were aided by a
smaller decline in the exports of coffee, which fell by 17.3% ‘10 Jan 28.1 86.6 -1,300
yoy in January-June, compared with -21.0% in January-May. J-Mar -1.6 37.6 -3,511
Similarly, the exports of wooden products, clothing and J-Apr 8.9 35.6 -4,650
footwear grew at a faster pace of 32.5%, 17.2% and 10.9% J-May 12.6 29.8 -5,376
yoy respectively in January-June, compared with the J-Jun 15.7 29.4 -6,728
corresponding rates of +31.1%, +17.1 and +7.7% in January-
May, while the exports of precious stones & metal fell by a 2 0 0 9 (Jan-Jun) -10.1 -33.7 -2,108
smaller magnitude during the period. In the same vein, the 2 0 1 0 (Jan-Jun) 15.7 29.4 -5,376
exports of electronic & computer parts picked up to 31.4%
Source : The General Statistics Office of Vietnam
yoy in January-June, from +30.4% in January-May. These
were, however, offset partially by a moderation in the exports
of machinery equipment & parts and electric wires & cables, which eased to 67.4% and 86.9% yoy respectively in
January-June, from the corresponding rates of +72.9% and 100.4% in January-May. Similarly, the exports of crude oil
fell by a larger magnitude (-17.8% yoy in January-June versus -17.4% in January-May), while the exports of coal and
petroleum products slowed down during the period. Similarly, the exports of fishing products softened to 14.2% yoy in
January-June, from +18.0% in January-May. Imports, however, moderated to 29.4% yoy in January-June, from
+29.8% in January-May and compared with -34.1% in the corresponding period of 2009. This was due to softer imports
by FDI sector, suggesting that exports may turn softer in the months head. Imports of domestic sector, however, inched
up during the period, suggesting that domestic demand will likely remain resilient.

Retail sales, however, moderated to 26.7% yoy in January-June in 2010, from +26.9% yoy in January-May and
compared with +20.0% in the corresponding period of 2009 (see Table 4). This suggests that consumer spending has
eased some what during the month. The moderation was due to a slowdown in retail sales at individual controlled
enterprises, which eased to 14.6% yoy in January-June, from +16.9% in January-May. This was, however, mitigated by
a pick-up in retail sales at private and FDI controlled enterprises, which accelerated to 42.3% and 41.1% yoy respectively
in January-June, from the corresponding rates of +39.8% and 32.7% in January-May. Similarly, retail sales at collective
controlled and state owned enterprises grew at a faster pace of 40.9% and 44.9% yoy respectively in January-June, from
the corresponding rates of +37.6% and +44.3% in January-May. In terms of sectors, slower retail sales were reflected
in hotel & restaurants, tourism and services sectors. These were, however, mitigated by a slight pick-up in sales at trade
sector.

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 1 July 2010

Table 3
Cummulative Exports And Imports by Commodity
2009 2010
J-Sep J-Oct J-Nov J-Dec Jan J-Mar J-Apr J-May J-Jun
Exports: (YTD, %, yoy)

Agriculture
Fishing -9.5 -8.7 -6.2 -6.7 27.9 14.5 20.2 18.0 14.2
Coffee -19.7 -17.3 -17.4 -19.0 -4.7 -31.0 -22.8 -21.0 -17.3
Rice -7.8 -7.8 -5.8 -8.0 50.6 -16.8 -3.1 -3.0 0.4
Mining
Coal -21.2 -19.4 -11.3 -4.5 68.6 21.2 27.7 34.4 30.4
Crude Oil -45.6 -43.0 -41.7 -40.0 24.5 -9.6 -9.2 -17.4 -17.8
Manufacturing
Rubber -41.0 -41.2 -32.4 -25.2 210.0 104.0 141.7 85.5 81.3
Wooden Products -14.2 -14.0 -11.1 -9.9 37.0 26.3 31.6 31.1 32.5
Clothing -1.0 -1.5 -1.1 -1.3 3.9 12.3 18.9 17.1 17.2
Footwear -13.7 -16.1 -15.9 -15.8 6.3 10.1 5.7 7.7 10.9
Precious stones/Metals 278.6 269.3 264.0 243.1 -87.1 -98.1 -97.0 -65.1 -48.5
Electronics/Computer Parts 0.0 0.1 1.1 5.1 56.4 40.7 39.1 30.4 31.4
Machinery Equipments/Parts 0.0 -0.4 2.3 9.1 139.9 66.5 74.7 72.9 67.4

Imports:
Petroleum -52.6 -47.9 -45.3 -43.8 53.0 33.2 19.6 16.3 11.6
Raw Plastic -13.7 -10.9 -7.4 -4.1 114.3 53.0 54.7 50.6 49.3
Fabrics -8.7 -8.6 -6.9 -5.2 65.8 13.2 19.0 23.9 27.0
Footwear Materials -23.7 -23.2 -20.8 -17.8 68.5 21.6 24.8 31.7 35.7
Electrical/Computer Supplies -0.6 -0.3 3.2 5.9 123.5 53.1 43.7 39.1 37.8
Auto -23.9 -12.0 -3.6 2.5 156.6 66.0 57.0 39.5 27.6
Machinery Equipments/Parts -15.4 -13.0 -10.3 -5.6 42.3 10.8 14.8 11.3 13.1

Source : The General Statistics Office of Vietnam

Vietnam’s headline Table 4

inflation, on the other Cumulative Retail Sales
hand, grew at a slower 2009 2010
pace of 8.7% yoy in
J-Jun J-Sep J-Oct J-Nov J-Dec Jan J-Mar J-Apr J-May J-Jun
June, compared with ( YTD, % yoy )
+9.1% in May and after
reaching a peak of +9.5% Total 20.0 18.6 18.0 18.5 18.6 23.1 24.1 25.0 26.9 26.7
in March (see Table 5). By Ownership
This was the third State -3.7 0.5 -1.5 -1.2 1.4 -1.0 2 0 . 3 40.4 44.3 44.9

consecutive month of Collective 1 4 . 9 1 5 . 1 1 7 . 6 1 7 . 5 1 8 . 8 1 9 . 2 2 8 . 7 3 4 . 1 3 7 . 6 40.9

moderation, suggesting Individual 2 2 . 8 2 0 . 0 2 1 . 3 1 9 . 4 2 2 . 9 2 7 . 1 1 8 . 7 1 5 . 7 1 6 . 9 14.6

that price pressure is Private 2 3 . 7 2 3 . 5 2 0 . 9 2 5 . 4 2 0 . 3 2 5 . 0 3 4 . 8 3 7 . 3 3 9 . 8 42.3

easing. Slower increases FDI 1 9 . 7 1 2 . 4 0.6 6.7 9.5 2 4 . 3 2 6 . 3 3 0 . 3 3 2 . 7 41.1

in prices of the prices of Source : The General Statistics Office of Vietnam

textiles & footwear and
household appliances,
which eased to 6.9% and 5.1% yoy respectively in June, from the corresponding rates of +7.0% and +5.3% in May,
helped. These were aided by a slowdown in the costs of housing & construction materials and transport, which grew
at a slower pace 16.2% and 14.8% yoy respectively in June, compared with the corresponding rates of +17.9% and
+18.2% in May. These were, however, offset partially by a pick-up in food & foodstuffs prices, which inched up to 9.3%
yoy in June, from +9.2% in May. Similarly, the costs of communications fell by a smaller magnitude during the month.
The costs of healthcare, sports & entertainment and education as well as the prices of beverages & tobacco, on the other
hand, remained stable during the month. The moderation in inflation would provide more room for the State Bank of
Vietnam to keep its key policy rate unchanged since it raised it to 8.0% in December 2009. This, coupled with prospects
of a slowdown in global economy, suggests that the State Bank of Vietnam will probably not raise its key policy
rate in the near term.

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 1 July 2010
As a whole, the key economic data in June suggest that economic activities are still improving in the 2Q,
after recording a growth of 5.8% yoy in the 1Q. Indeed, the General Statistics Office of Vietnam reported that the
country’s economy grew at a faster pace of 6.2% yoy in 1H 2010, compared with +5.8% in the 1Q. In response to
stronger economic growth and rising inflationary pressure, Vietnam has shifted its policy stance to a tightening bias. The
pace, however, remains gradual. As it stands, it has yet to tighten its policy further after raising its key policy rate in
December. Indeed, Vietnam will probably not raise its key policy rate in the near term. After all, in a move to liberalise
the lending practices in the country, it has led to a rise in lending rates. Vietnam’s commercial banks, however, have
agreed to lower lending rates to about 12% and deposit rates to about 10% in July, in a move to help the government
meet a target growth of 6.5% in 2010. Vietnam’s lending rates are currently as high as 14.5% and deposit rates are
as high as 11.5%. As a whole, we believe the Vietnamese economy will likely expand at a faster pace of 6.4%
in 2010, compared with +5.3% in 2009. On the currency front, the State Bank of Vietnam has devalued the Dong twice
to ease pressure on its current account deficit. The first devaluation was on 27 November in 2009 and the Dong fell
by about 5%. On 10 February this year, the Dong was devalued by 3.3% against the US dollar. We expect the Dong
to remain weak in view of the widening trade deficit, which will likely be mitigated by a pick-up in an inflow of foreign
direct investment (FDI). We expect the Dong to weaken to around 19,100 by end-2010.

Table 5
Weights In The CPI
2008 2009 2010 2010 2009 2010
May Jun May Jun (Jan-Jun) *
Group: %,yoy %,mom %,yoy %,Cumyoy

Food and footstuffs 22.9 6.1 -0.1 +0.4 9.2 9.3 14.5 9.2
Food 29.7 11.2 -1.3 -0.8 9.0 9.3 13.6 11.7
Foodstuffs 20.3 3.6 +0.1 +0.7 9.2 9.2 12.5 8.4
Beverages & cigarette 4.5 5.7 +0.3 +0.6 8.0 8.0 11.2 7.8
Garment, footwear, hat 3.9 3.5 +0.3 +0.3 7.0 6.9 10.8 6.7
Housing/Construction materials 8.5 10.3 +1.5 +0.0 17.9 16.2 2.8 15.5
Household appliances 2.7 1.3 +0.4 +0.5 5.3 5.1 10.9 5.2
Medical products/Healthcare 3.6 0.4 +0.3 +0.2 3.3 3.3 8.3 3.2
Transport 12.0 10.3 +0.1 -0.7 18.2 14.8 -2.9 18.1
Education 0.8 2.3 +0.1 +0.1 6.5 6.5 6.1 6.4
Culture, sport, entertainment 2.6 2.5 +0.4 +0.4 4.0 4.0 8.0 2.6
Other consumer goods & services 5.1 7.4 +1.3 +0.5 12.3 11.3 11.5 12.2

TOTAL CPI 13.5 5.3 +0.3 +0.2 9.1 8.7 10.1 8.8

*: RHBRI’s estimates Source : The General Statistics Office of Vietnam

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