WALL STREET JOURNAL

Vietnam Growth Quickens

Despite third-quarter improvement, economy is still likely to miss the government growth target for the year

Vu Trong Khanh

Sept. 29, 2016 2:28 a.m. ET

HANOI—Vietnam’s economy gained momentum in the third quarter, fueled by strong bank lending and rising exports, but is still likely to miss the government growth target for the year.

Gross domestic product in the three months ended September was up 6.40% from a year earlier, accelerating from the second quarter’s 5.78% pace, preliminary figures from the General Statistics Office showed Thursday. Second-quarter growth was revised up from 5.55%.

For the first nine months of this year, GDP was up 5.93% from a year earlier, slowing from the 6.53% of the first nine months of 2015, the GSO said. The manufacturing sector grew 7.50%, the services sector 6.66% and the agricultural sector—hit by a drought earlier in the year—0.65%.

Economists said hitting the full-year growth target of 6.7%—compared with 6.68% last year—remains unlikely due to a first-half contraction in agriculture and mining, which was hurt by low global commodity prices. GDP growth in the first half was well under 6%, and earlier this week, the Asian Development Bank forecast full-year growth at 6%.

Rising exports and an expansion of bank lending, along with government infrastructure spending and increased foreign investment, are helping the economy pick up speed.

Bank lending as of Sept. 20 was up 10.46% this year, according to the State Bank of Vietnam, while total money supply, or M2, was up 11.76%. The central bank’s credit-growth target for the full year is 18% to 20%.

Foreign direct investment inflows in the first nine months of this year were up 12.4% from a year earlier to $11.02 billion, the Ministry of Planning and Investment said.

According to GSO data released Thursday, Vietnam’s industrial production in September was up 7.6% from a year earlier, slightly faster than August’s 7.5% pace. For the first nine months of the year, industrial production was up 7.4%, slower than the 9.9% during the same period last year—mainly due to the mining contraction, according to the GSO.

The country likely recorded a trade deficit of $100 million in September, compared with a surplus of $573 million in August. For the January-September period, exports were likely up 6.7% from a year earlier to $128.2 billion, while imports were likely up 1.3% at $125.4 billion, the GSO said. This would result in a trade surplus of $2.8 billion.

Though economic growth is accelerating, public debt is nearing the government’s mandated ceiling of 65% of the GDP, prompting fresh efforts to speed up privatization. The government recently announced that this year and next it will sell its stakes in a dozen major companies, including the country’s largest dairy company, Vietnam Dairy Products JSC, and its largest brewers, Saigon Beer Alcohol & Beverage Corp. and Hanoi Beer Alcohol & Beverage JSC.  These deals could be valued at several billion U.S. dollars