December 28, 2016 / 4:46 AM / in 7 months

UPDATE 2-Vietnam suffers first slowdown in economic growth for 4 years

4 Min Read

* 2016 growth seen at 6.21 percent in 2016 vs 6.68 pct in 2015

* Drought, floods, pollution disaster hurt farms, fisheries

* Q4 has best quarter growth in 2016 as agriculture picks up

* Trade balance swings back into surplus in 2016 (Adds details, analyst comments)

By Mai Nguyen

HANOI, Dec 28 (Reuters) - Vietnam's economy expanded an estimated 6.21 percent this year, slightly behind 2015 and marking the first slowdown in four years, but a fourth-quarter surge to 6.68 percent was the best for a year, keeping it among Asia's fastest-growing economies.

Drops in agriculture and mining dragged full year growth below last year's 6.68 percent and the government's target of 6.3-6.5 percent, the General Statistics Office (GSO) said on Wednesday.

"2016 GDP has not reached target or had any major breakthroughs but in general the economy has had good growth except for the agriculture and mining sectors," GSO head Nguyen Bich Lam told reporters.

In 2015, Vietnam's economy had expanded at its fastest pace since 2007 having maintained growth momentum since 2012. The slower annual growth this year -- the first deceleration since 2012 - left Vietnam ranked behind India, China and the Philippines.

The Statistics Office put the drop in pace down to adverse weather, a marine environmental disaster and an unfavourable global economy.

"The 6.21 growth this year is actually not too bad given the outside factors like weather and the international markets," said Tran Minh Hoang, chief economist at Vietcombank Securities.

"Next year growth may improve slightly to 6.3-6.5 percent as the oil market stabilises and public spending increases," Hoang added.

Severe drought in the Central Highlands coffee growing region, salination in the paddy fields of the Mekong Delta, a cold spell in the north and floods in the central region also trimmed farm sector growth to 1.36 percent in 2016, the statistics office said.

Vietnam is the world's second largest coffee producer after Brazil and ranks third behind India and Thailand in rice exports. Other key foreign exchange earners include mobile phones, textiles, footwear, fish and shrimp.

Vietnam's mining sector fell 4 percent this year on low prices of coal and crude oil, after an increase of 6.5 percent in 2015, while an enviromental disaster in April that was blamed on the local steel-making unit of a Taiwanese conglomerate devastated fisheries.

Fourth Quarter Growth Cushions Slows

On the bright side, October-December GDP growth was the best this year as agriculture rebounded during the main rice harvest season, and there was solid growth in manufacturing, construction and services, which benefitted from a record 10 million foreign visitors this year, the statistics office said.

Retail sales grew 9.1 percent in 2016, while domestic credit growth quickened to 18 percent as bank lending rose toward the year-end, with construction firms active borrowers.

Attracted by cheap labour and tax incentives inflows of foreign direct investment (FDI) struck a record $15.8 billion this year. FDI was up 9 percent on last year.

South Korean investors pledged the most funds in 2016, including $1.5 billion for LG Display's OLED screens plant and by LG Innotek's $550 million camera plant.

Despite the chill in the global economy, exports grew a respectable 8.6 percent in 2016 to total $175.94 billion, while imports growth was a more modest 4.6 percent, totalling $173.26 billion. That left Vietnam, with an estimated trade surplus of $2.68 billion for this year, compared with a deficit of $3.63 billion in 2015.

GSO's Lam noted, however, that Vietnam's increasing exposure to international trade meant it was more vulnerable to any threats of protectionism that might arise out of the election of Donald Trump as U.S. president, and Britain's vote to leave the European Union. ($1 = 22,770.0000 dong) (Reporting by Mai Nguyen; Additional reporting by Ho Binh Minh and My Pham; Editing by Simon Cameron-Moore)

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