Vietnam at a glance:Out with oil,in with tourism

Less oil, more tourists: For the Vietnamese government, oil is old and tourism istrending. The government aims to incentivize more visitors to the country amidstfalling oil production. We believe this to be a more sustainable policy, given thecountry's dwindling oil production and its growing services sector. It should alsoprovide support for the current account, partly offsetting the decline in oil exports andVietnam's import-intensive electronics production. Moreover, we are optimistic onVietnam's tourism sector in light of recent reforms. We expect visitor numbers toexceed 10m annually in the foreseeable future, provided continued liberalization anda benign external environment.

    The end of an era: Vietnam's oil production peaked in 2000but remained a bedrockfor growth from 2000-2010(in addition to production of textiles, footwear, andagriculture). However, production of fossil fuels has fallen in recent years, andgovernment officials have signalled that this could be the new norm. Fortunately, withthe end of an era comes a new one: Vietnam has comfortably shifted to electronics,which has been a reliable source for growth over the past several years (Chart 1).Tourism has also provided a boon to the services sector, which with continueddevelopment could provide Vietnam with more diversified sources of growth.

    Exports up, PMI down: Meanwhile, exports remain on sunny grounds, at least fornow. October marked the third consecutive month of above-20% export growth, drivenby a 76.4% y-o-y rise in phone exports. However, the PMI dipped as respondentspointed to signs of softer demand. This affirms our view of still-high but slower growthin 4Q, despite perhaps a marginal slowdown in exports and manufacturing.