Abstract
We maintain our 2.9% growth forecast for 2009 after GDP grew by an estimated
3.1% y-o-y in Q109
following a revised 6.18% expansion in 2008. With the
economy likely to continue to suffer, we expect
further monetary and
fiscal stimulus measures over the remainder of the year, but carry doubts
about their
effectiveness. We expect GDP growth of 5.0% in 2010 as the
global economy begins to recover and a
weaker dong bolsters exports.
We foresee both economic and political risks rising in 2009 as global demand
for Vietnam' s
manufactured exports fall and factories lay off workers. The
global recession will shake the foundations
of the Vietnamese growth story
as it has been reliant on strong demand for manufactured products from
G3
markets. With demand from developed markets slumping, Vietnam will be heavily
reliant on
remittances and FDI inflows to stimulate domestic demand and
keep GDP growth in positive territory.
With Prime Minister Nguyen Tan
Dung' s economic reform agenda intact, although currently on the
backburner,
we expect GDP growth to return to around 8% in 2011 and
onwards.
Vietnam is in line to take a hard hit in 2009 as exports to G3
economies contract sharply. We have revised
down our GDP growth forecast
for 2009 from 5.0% to 2.9% as the construction and manufacturing
sectors
contract. With domestic demand far from sufficient to fill the gap and Hanoi
lacking the
wherewithal to implement any sizeable fiscal stimulus, we
believe the government will opt for the easy
way out by devaluing the dong
to increase the price competitiveness of Vietnamese exporters. We are
currently expecting a 8.0% devaluation of the currency in 2009 to
VND19,000/US$ by year-end, which
should help growth recover to 5.0% in
2010.
Growth in 2008 was largely held up by the resilience of the export
sector in the face of a domestic
economy plagued by spiralling inflation
and fiscal and monetary tightening. However, like many other
Asian
countries, H208 proved to be a half of reckoning for Vietnamese exporters as
exports fell from
US$6.6bn in July to US$3.8bn in December. This decline
turned into a slump in January with the exports
of textiles decreasing by
33.2% y-o-y to US$550mn, footwear exports falling 26.0% to US$350mn and
overseas shipments dropping 34.4% to US$120mn.
Vietnam' s trade deficit
contracted in H208 after having ballooned in the first half of the year, as
imports
of gold, automobiles and other capital goods skyrocketed as
Vietnamese sought to protect their household
wealth from rapidly
increasing inflation. Threatened with a balance of payments crisis and a
collapsing
currency, the Vietnamese government hiked import taxes on
automobiles and suspended gold imports in
May and June 2008, respectively.
Falling global commodity prices helped Vietnam narrow its trade
deficit
from a massive US$14.2bn in H108 to a mere US$3.3bn shortfall in the second
half of the year.
We expect Vietnam' s trade deficit to narrow sharply to
US$9.3bn in 2009 after the record US$17.5bn
shortfall accumulated in 2008.
This will lead to a significant improvement in Vietnam' s
balance-ofpayments
situation in spite of an expected fall in remittances
and foreign direct investment inflows.
We are expecting the agricultural
sector to post real growth of 3.0% in 2009 as lower fuel and fertiliser
prices reduce production costs and both internal and external demand for rice
is boosted as consumers
substitute more expensive options such as meat and
vegetables for the food staple. We are also expecting
the service sector
to post healthy growth.
In the Asia Pacific, we profile 23 companies.
These are AEGON, AIG, Allianz, Aviva, AXA, Cardif,
Fortis, Generali,
Groupama, HDI-Gerling, HSBC Insurance, ING Group, Liberty Mutual,
Manulife, MetLife, Prudential Financial, Prudential plc, QBE, RSA, Sun Life
Financial, The
Hartford, Principal Financial Group and Zurich Financial
Services.
Over the course of 2008, estimated total premiums in Vietnam
rose by 16% to VND21,665,000mn. Nonlife
premiums rose by 19% to
VND10,855,000mn while life premiums rose by 13% to
VND10,810,000mn.
Between now and the end of the forecast period, we expect that annual non-life
premiums will grow by
VND14,203,000mn, while annual life premiums should
grow by VND21,126,388mn.
Growth in non-life premiums should be driven by
the general growth of nominal GDP plus a rise in nonlife
penetration from
the current level of 0.73% to 1.00%.
Growth in life premiums should be
driven by the change in the overall population and a rise in life density
from US$6.78 to US$20.00 per capita.
BMI' s Insurance Business Environment
Rating is 44.1.
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