By Khanh Vu and Phuong Nguyen
HANOI (Reuters) – Vietnam reported on Thursday that economic growth accelerated in the second quarter, driven by the services sector, although analysts Said the drop in trade could signal a future economic slowdown.
Vietnam, a regional manufacturing hub, has struggled to shore up its economy amid slowing global demand, with the central bank cutting policy rates four times so far this year and lawmakers extending the deadline for cutting value surcharges .
Gross domestic product (GDP) in the second quarter grew by 4.10% year-on-year, faster than 3.11% .28% Expanded in the first quarter, the General Statistics Office (GSO) said in a report. First-quarter growth was revised down from 3.32%.
The service industry grew by 6.% year-on-year in the second quarter, and the agricultural sector increased by 3. GSO said,. 14%, manufacturing and construction expanded by 2.32%.
But exports fell 14.2% year-on-year in the second quarter due to weak global demand, the agency said, adding Imports fell by 25.3%.
The sharp drop in imports could point to a future slowdown in industrial production as companies reduce purchases of raw materials and equipment, analysts said. Vietnam is a major exporter of electronics, clothing and textiles, footwear and wood products, including top global brands.
Capital Economics on Thursday lowered its GDP growth forecast for Vietnam this year to 4.5% from 5.0%.
“The external environment is likely to remain unfavorable for the second half of the year, and we expect the economy to struggle in the coming quarters,” Capital Economics said.
It added that the central bank is likely to cut policy rates further by 32 basis points before the end of the year, noting that inflation has moderated.
The national GDP growth target for this year is 6.5%, lower than last year’s 8.%.
GSO added that industrial output fell 1.2% year-on-year in the January-June period. In the first half of this year, the retail sales of goods and services increased by .9% year-on-year, while the average consumer price rose by 3.27%.
Production of smartphones, Vietnam’s largest export earner, fell by 25.1% YoY in Q2 to 50 8 million units, GSO said. Apparel production fell 2.9 percent in the quarter, while footwear production edged down 4.1 percent.