Boston, MA -- (SBWIRE) -- 12/19/2013 -- Although we expect the Vietnamese economy to record yet another quarter of sub-par growth in Q4 2013 (at the time of writing), we are beginning to see potential for upside surprises to domestic demand over the coming quarters, providing potential comfort to the country's freight mix. Recent data on foreign direct investment inflows, remittances, passenger car sales, and property market launches, suggests to us that domestic demand is on a nascent recovery, setting the stage for stronger 2014 growth.

The general consensus is expecting the Vietnamese economy to suffer yet another quarter of sub-par growth mainly due to subdued external demand and the lack of progress on banking sector reforms. This is closely in line with our view that real GDP growth will come in at just 5.3% in 2013, a slight improvement from 5.2% in 2012. Looking ahead to 2014, however, evidence of improving macroeconomic fundamentals in Vietnam (especially with regards to the outlook for domestic demand) suggests to us the balance of risks to our growth forecast of 6.0% is gradually tilting towards the upside.

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Total foreign direct investment (FDI) inflows are also set to surpass the government's full-year target of US $13bn, after data released by the Ministry of Planning and Investment showed that inflows surged by 19.5% year-on-year (y-o-y) growth over the first eight months of the year. The strong reading chimes with our view that the country's solid long-term growth story should continue to attract foreign investors over the coming years.

In terms of the Vietnamese freight industry, 2014 is set to see healthy growth across the board, albeit slightly slower than 12 months previous for most modes. Leading the way for year-on-year growth will be road freight with impressive double digit increases expected (11.90%). The air freight sector will see annual tonnage growth of 5.11% in 2014, while the ports of Da Nang and Ho Chi Minh City will both perform well (7.00% and 6.06% respectively. Rail freight lags a little in y-o-y growth terms, with 3.12% annual growth pencilled in for 2014.

Headline Industry Data

- 2014 rail freight tonnage is set to increase by 3.12% to 7.52mn tonnes.
- 2014 air freight tonnage is forecast to rise by 5.11% to 198,700 tonnes.
- Tonnage handled at the Port of Ho Chi Minh City in 2014 is forecast to grow 6.06%, whereas tonnage handled at the Port of Da Nang is forecast to increase 7.00%.
- 2014 road freight tonnage is forecast to grow by 11.90% to 902.64mn tonnes.
- 2014 total trade is forecast to rise by 5.30%.

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