Customers buy fruit and vegetables at the Saigon Co.opmart supermarket on Nguyen Trai street in Hanoi (Photo: VNA)Hanoi (VNS/VNA) - Vietnam's private consumption growth will remain strong, supported byimprovements in the labour market as youth unemployment falls, minimum wagesgrow and lower inflation levels prevail, experts forecast.
Finance expert Nguyen Tri Hieu told Vietnam News that improvements in the country’slabour market would be the key force driving private consumption growth whilelower levels of inflation would also boost spending.
According to reports from the GeneralStatistics Office (GSO), labour market data for the second quarter of this yearshowed a decline in youth urban unemployment to 9.8 percent from 10.6 percentin the first quarter while overall urban unemployment remained stable at 3.1 percent.
Vietnam’s unemployment rate is forecastlow, at 3.4 percent of the total labour force in 2019 for all demographicgroups, remaining constant from 2018. This level is projected to be retainedover medium terms to 2023.
The continued structural shift inmanufacturing facilities from China to Vietnam, which is being expedited byuncertainty from the US-China trade war and the signing of the EU-Vietnam FreeTrade Agreement on June 30 this year, has also provided a boost to theVietnamese economy and improves the employment outlook.
Besides, further underpinning the positiveconsumer outlook is the fact that minimum wage growth continues to increase,albeit at a slower rate.
After a growth of 7.3 percent and 6.5 percentrecorded in 2017 and 2018 respectively, the National Wage Council hascontinually increased the minimum wage by average of 5.3 percent in 2019. In 2019,minimum wages range from 2.92 million VND (125 USD) to 4.2 million VND, compared with 2.8 million VND and 4.0 million VND of 2018.
“Consumption of local people, especiallythe young, has been increasing significantly, given by the rising incomes andenhanced living standards,” Hieu said.
According to Euromonitor, per capitadisposable income was at more than 40 million VND last year and expects an average growth of 5.9 percent annually in the2019-30 period, leading to corresponding growth of consumer spending.
The middle-income class is also increasingrapidly and it was forecast that 49 percent of households will have an annualdisposable income of between 5,000 USD and 15,000 USD, up from 33.8 percent in 2018.
Meanwhile, the country’s inflationarypressures remain under control, providing further stimulus for spending.
GSO data showed that the country’sinflation cooled to 2.57 percent in August 2019, down from 3.52 percent inAugust 2018. The rate was the lowest rise for the past three years.
In 2019, inflation is projected to averageat 2.9 percent, buoyed by weak transport inflation due to a drop in average oilprices in the year.
The factors highlighted above are alreadyhaving a positive impact on retail sales. In the GSO’s data release, retailsales grew by 11.6 percent in July 2019, up from 11.1 percent in July 2018.
Indicative of an improving outlook over2019 is the broader uptick in retail sales, with growth of 11.9 percent averageannually over the first seven months of 2019, up from the 10.2 percent over thesame period in 2018.
Analysts from Fitch Solutions MacroResearch recently also forecast although slightly cooling this year, privateconsumption growth in Vietnam would remain robust, expanding by 6.5 percent in2019 and picking up further to 6.8 percent in 2020.
“Retail sales in Vietnam have recordeddouble-digit growth rates and we expect this to hold over 2019. We highlight Vietnamas one of the most promising consumer markets in Asia Pacific, along withIndonesia, the Philippines, India and China,” Fitch analysts noted.
According to Hieu, local consumption will continually support Vietnam’s economic growth,especially when the global market slows and is becoming volatile.
“Robust domestic consumption will be animportant driver for the country’s growth and help reduce dependence onexports,” Hieu said./.
