macro outlook 2019
TRANSCRIPT
Macro outlook 2019March 2019
Asia: Brace, brace
Asia has started to loose some steam of late
3
46
47
48
49
50
51
52
53
54
Dec-11 Aug-12 Apr-13 Dec-13 Aug-14 Apr-15 Dec-15 Aug-16 Apr-17 Dec-17 Aug-18
New export orders New domestic orders
PMI manufacturing orders (3 mma)
Source: Markit, HSBC
Trade downturn runs deeper than tariffs
4
OECD leading indicator (index)
Source for both charts : CPB, OECD, HSBC
95
96
97
98
99
100
101
102
Jan-00 Jan-04 Jan-08 Jan-12 Jan-1630
35
40
45
50
55
60
65
Jan-98 Jan-02 Jan-06 Jan-10 Jan-14 Jan-18
Global electronics PMIs new orders (index))
Tariffs… who stumbled?
5
-20
-10
0
10
20
30
40
Mar-10 Mar-11 Mar-12 Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 Mar-18
US imports from China US export to China
Source: CEIC, HSBC
% y-o-y, 3mma
Where the trade tensions hurt
6
-1.2
-1.0
-0.8
-0.6
-0.4
-0.2
0.0
China USA Korea Japan
Source for both charts: IMF, CEIC, Census Bureau, HSBC
US tariffs on
auto imports
Impact of US-China trade war on GDP growth (ppt)*
*Direct trade impact of a 25% US tariff on USD250bn
of imports from China, and Chinese retaliation
0 20 40 60 80 100
PC accs.
Apparel
Furniture
Footwear
Glassware
Stereos
Computers
Cell phones
Cutlery
Toys, etc
Others Rest of Asia China
Share of global exports (%)
Who’ll take over from China?
7
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
IN ID TH MA PH VN
Exports Investment
*Assuming economy ‘captures’ 1% of Chinese exports
to US or 1% of FDI into China
Potential gains from trade diversion* (% of GDP)
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
MY* SG VN NZ JP AU IN ID SK TH
Impact of CPTPP (% of GDP)
Source for both charts: IMF, CEIC, PIIE, HSBC
*not yet ratified
Sustainable growth in turbulent times
Vietnam is still poised for continued robust growth
Source for both charts: CEIC, HSBC
Strong GDP growth in the next few
years
Manufacturing’s contribution coming off a 10-
year high
9
0.0
0.5
1.0
1.5
2.0
2.5
3.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Dec-07 Dec-09 Dec-11 Dec-13 Dec-15 Dec-17Industry: Manufacturing
contribution to growth, ppt
highest contribution in at least 10 yrs.
-2
0
2
4
6
8
10
-2
0
2
4
6
8
10
Dec-16 Jun-17 Dec-17 Jun-18 Dec-18
Agriculture MiningManufacturing ConstructionServices OthersGDP, y-o-y (RHS)
ppt, contribution YTD, y-o-y
f'cast
Exports growth should slow from 2017 but should remain robust
Source: CEIC, HSBC
10
-10-505101520253035
-10-505
101520253035
Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18
Exports: Crude Oil Textile and footwear Phones and computer electronics Others
contribution to export growth, ppt contribution to exports growth, ppt
But it’s not all about manufacturing and exports…
Source for both charts: CEIC, Ministry of Planning and Investment, HSBC
Services, particularly transport, accommodation,
and retail sales have outperformed
Unemployment and underemployment rates
have declined, while wage growth has risen
11
0.0
2.0
4.0
6.0
8.0
10.0
1.5
1.7
1.9
2.1
2.3
2.5
Mar-15 Nov-15 Jul-16 Mar-17 Nov-17
Unemployment Rate
Underemployment Rate
Average Monthly Earning, % y-o-y (RHS)
% y-o-y%
0.0
2.0
4.0
6.0
8.0
10.0
12.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Sep-13 Oct-14 Nov-15 Dec-16 Jan-18
Wholesale, Retail Sales & Motor Vehicles
Transportation & Storage
Accommodation & Food Service Activities
YTD, y-o-yYTD, y-o-y
But it’s not all about manufacturing and exports…
Source for both charts: CEIC, HSBC
Tourism has reached above 10m arrivals for the
past two years
Around 70% of tourists to Vietnam come from Asia,
mostly from China and South Korea
12
Americas
Europe
Oceania
China
Japan
South Korea
Rest of Asia
Asia
0
2
4
6
8
10
12
14
0
2
4
6
8
10
12
14
Asia Americas Europe Oceania
millionmillion
10 million arrivals
Domestic risks
Public debt as a reduced threat
Source for both charts: CEIC, HSBC
Public debt-to-GDP in 2017 declined for the first
time since 2012……the fiscal deficit also dropped to below 4%
of GDP in 2017
14
50.8
54.5
58.0
61.0
63.7
61.3 61.4 61.0 60.9
45.0
47.0
49.0
51.0
53.0
55.0
57.0
59.0
61.0
63.0
65.0
45.0
47.0
49.0
51.0
53.0
55.0
57.0
59.0
61.0
63.0
65.0
% of GDP% of GDP Public debt -to-GDP limit
-280
-210
-140
-70
0
2012 2013 2014 2015 2016 2017 2018f 2019f
-8.0
-6.0
-4.0
-2.0
0.0
Fiscal Balance Fiscal Balance, % of GDP (RHS)
VND, trn % of GDP
Credit growth: Quality over quantity
Source: CEIC, HSBC
15
0
5
10
15
20
25
0
5
10
15
20
25
Dec-13 Sep-14 Jun-15 Mar-16 Dec-16 Sep-17 Jun-18Agri. and Forestry Construction
Industry Trade, Transport & Telecom
Real estate, financial, and other services Credit Outstanding (RHS)
%, yoyppt, contribution
Macro-prudential measures have helped funnel credit away from real estate toward tradable industries
Credit growth: A race to recapitalise
Source: CEIC, HSBC
16
8.0
9.0
10.0
11.0
12.0
13.0
14.0
15.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
15.0
Jul-12 Feb-13 Sep-13 Apr-14 Nov-14 Jun-15 Jan-16 Aug-16 Mar-17 Oct-17 May-18
Credit Institutions State-owned Banks Joint Stock Commercial Banks
% %
Joint Venture,Foreign banks: 27.4% (2017)
Capital adequacy ratio has fallen consistently, especially at state-owned banks
Inflation risks greatly reduced
17
HSBC Research - Vietnam at a glance: 02 January 2019
Long-term outlook
FDI as a driver for future growth
Source for both charts: CEIC, HSBC
FDI has grown consistently over the past few
years…
…with the lion’s share going to the manufacturing
sector
19
63%9%
7%
3%
18%
Manufacuturing Real Estate
Retail Transportation & Storage
Others
0
2
3
5
6
8
0
2,500
5,000
7,500
10,000
12,500
15,000
2010 2011 2012 2013 2014 2015 2016 2017
Total FDINet FDITotal FDI (% of GDP), RHSNet FDI (% of GDP), RHS
USDm % of GDP
FDI as a driver for future growth
Source for both charts: CEIC, HSBC
Foreign-invested exports have grown significantly
over the past 10 years…
…while labour is still primarily in agriculture
20
0
3
6
9
12
15
0
3
6
9
12
15
00 02 04 06 08 10 12 14 16Exports: Foreign Invested Sector
Exports: Domestic Sector
USDbn, 12mmaUSDbn, 12mma
0
10
20
30
40
50
0
10
20
30
40
50
2012 2013 2014 2015 2016
Employment: Agriculture, Forestry and Fishery
Employment: IC: Manufacturing
Employment: Service
% of total employed% of total employed
Gains from trade still to be had… TPP is coming
-1
0
1
2
3
4
5
6
7
8
AU* NZ* JN* MA* SI* VN* KR PH TH TA ID
TPP 11 TPP TPP 16
Source: Petri, Peter et al, “Going it alone in the Asia-Pacific: Regional Trade
Agreements Without the United States”; PIIE Working Paper, 17-10, October, 2017
Note: *Denotes TPP member.
Gains to national income by 2030 relative to baseline (%)
21
Long-term growth forecast
Source for all charts: HSBC
Projected ranking changes by 2030 compared with 2018
22
HSBC long-term growth model projections for real GDP growth
Labour productivity relative to the US (US = 100)
Source: The Conference Board, HSBC
23
0
10
20
30
40
50
60
70
80
90
100
110
120
CH HK IN ID JP MY PH SI SK SL TA TH VN
2007 2017
US level
24
Getting old before getting rich
Productivity matters
-4
-2
0
2
4
6
8
10
-4
-2
0
2
4
6
8
10
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030
GDP growth - 40% I/GDP with reforms GDP growth - 35% I/GDP no reforms GDP growth - 35% I/GDP with reforms
Source: HSBC estimates
HSBC's key Vietnam
Economic Forecast 2013 2014 2015 2016 2017 2018f 2019F 2020F
GDP (%) 5.4 5.98 6.68 6.21 6.8 7.1 6.5 6.3
GDP per capital (USD) 1,854 2,010 2,074 2,207 2,286 2,480 2,617 2,806
CPI (average, % y-o-y) 6.6 4.1 0.7 2.7 3.5 3.5 3.4 3.7
Export, value (%, y-o-y) 15.3 13.8 7.9 9.0 21.8 13.4 9.7 8.3
Import, value (%, y-o-y) 16.0 12.0 12.0 5.2 22.3 10.9 10.2 9.2
Trade balance (USD bn) 0.00 2.4 -3.6 1.8 2.1 7.8 7.3 5.5
Int’l FX reserves (USD
bn) 25.5 33.8 27.9 36.2 48.7 59.3 67.3 75.3
USD/VND (end of period) 21,095 21,250 22,500 22,770 22,698 23200 23550 23800
Policy rate (end year, %) 5.5 6.5 6.5 6.5 6.25 6.25 6.25 6.25
HSBC key forecast
26
Source: HSBC Research – Asian Economics - Q1 2019
This document is issued by The Hongkong and Shanghai Banking Corporation Limited (HSBC). The information contained
herein is derived from sources we believe to be reliable, but which we have not independently verified. HSBC makes no
representation or warranty (express or implied) of any nature nor is any responsibility of any kind accepted with respect to
the completeness or accuracy of any information, projection, representation or warranty (expressed or implied) in, or
omission from, this document. No liability is accepted whatsoever for any direct, indirect or consequential loss arising from
the use of this document. Any information (including market date, prices, values or levels) contained here are indicative only
and any examples given are for the purposes of illustration only and may vary in accordance with changes in market
conditions. The opinions in this document constitute our present judgment, which is subject to change without notice. We
are not obliged to enter into any actual trade with you based on the any information contained herein. This document does
not constitute an offer for, or advice that you should enter into, the purchase or sale of any security, commodity or other
investment product or investment agreement, or any other contract, agreement or structure whatsoever This material is
intended for distribution to, or use by, Professional Investors only, as defined in the Hong Kong Securities and Futures
Ordinance. The document is intended to be distributed in its entirety. No consideration has been given to the particular
investment objectives, financial situation or particular needs of any recipient, you should conduct relevant due diligence and
analysis, and seek necessary independent professional advice. Unless governing law permits otherwise, you must contact a
HSBC Group member in your home jurisdiction if you wish to use HSBC Group services in effecting a transaction in any
investment mentioned in this document. This document, which is not for public circulation, must not be copied, transferred
or the content disclosed, to any third party and is not intended for use by any person other than the intended recipient or the
intended recipient's professional advisers for the purposes of advising the intended recipient hereon.
HSBC does not provide legal, tax, accounting, regulatory or other specialist advice and you should make your own
arrangements in respect of such matters accordingly. You are responsible for making an independent assessment and
obtaining specialist professional advice in relation to the merits of the proposals contained herein. In particular, this
document may contain certain references to regulation. HSBC makes no representation that the references to regulation, if
contained herein, are exhaustive. There could be other references to regulation that may also be relevant to the proposals.
HSBC does not give advice on regulation. You should consult your own advisers on regulation.
Copyright. The Hongkong and Shanghai Banking Corporation Limited 2017. ALL RIGHTS RESERVED. No part of this
publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic,
mechanical, photocopying, recording, or otherwise, without the prior written permission of The Hongkong and Shanghai
Banking Corporation Limited.
Disclaimer
27