Vietnam – Steering a Steady Course

Nguyen Phu Trong continues in his dual role as both general-secretary of the ruling CPV and national presidency, the latter role having been taken up following the sudden death of Tran Dai Quang last October. However, Trong is himself 75 years old, and the unexpected demise of Quang raises questions about the wisdom of piling extra authority and responsibility onto another senior leader. Trong’s second term as general-secretary will be his last, unless the rules are changed, and while he could secure another term as president when the leadership is once again refreshed in 2021, health and age requirements likely preclude such a development.

Trong presided over the 10th Plenum of the Central Committee of the CPV in May, and seemed to affirm the longstanding policy of reducing state ownership in the economy and facilitating private-sector activity. Likewise, the foreign policy strategy will continue to focus on maintaining a balance in relations with China, Russia, and the US.

Relations with the EU have improved as Europe seeks to strengthen alliances in Asia. The two sides finally signed a trade and investment agreement in June, and Vietnamese exports to the EU (worth $42.5 billion in 2018) are set to increase as a result of virtually tariff-free access.

The economy has remained strong, and a sizeable surplus in the current account balance suggests that Vietnam’s trade has not been adversely affected by US tariffs, even as the country has benefited from the relocation of manufacturing from China, which has contributed to an increase in inflows of FDI. For reasons that are not entirely clear, President Donald Trump has threatened to impose tariffs on Vietnamese exports, but it is unlikely that the US will follow through. Otherwise, agreements with the EU and membership in the CPTPP bloc will provide a solid basis for a steady increase in levels of FDI over the medium term that will sustain robust annual real GDP growth.

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