June 28, 2019 / 5:39 AM / in 21 days

UPDATE 1-Vietnam's Q2 economic growth remains strong amid trade war

(Adds comments, background)

By Khanh Vu

HANOI, June 28 (Reuters) - Vietnam’s economic growth remained strong in the second quarter, backed by robust exports and foreign investment amid the ongoing trade war between Washington and Beijing.

The Southeast Asian country has been touted as one of the largest beneficiaries of the trade war as some businesses are shifting their supply chains away from China to avoid U.S. tariffs.

Vietnam’s gross domestic product (GDP) grew 6.71% in the second quarter this year, slowing down from a revised expansion of 6.82% in the first quarter, the General Statistics Office (GSO) said on Friday.

The processing and manufacturing industry grew 9.14% during April-June from a year earlier, while the services sector rose 6.85% and the agricultural sector grew 2.19%, the GSO said in a statement.

Exports in the first half of the year rose 7.3% from a year earlier to $122.72 billion, while foreign direct investment inflows into the country grew 8% to $9.1 billion in the period.

“Although weaker global demand is likely to remain a drag, Vietnam is emerging as a clear winner of the escalating trade war as U.S. demand has shifted away from China towards alternative suppliers,” Capital Economics said in a note on Friday.

Vietnam’s exports to the United States rose 29% to $22.72 billion in the first five months of this year from a year earlier, according to Vietnamese government’s customs data.

U.S. President Donald Trump said on Wednesday his government was in discussion with Vietnam on trade, adding that Vietnam treated the United States even worse than China.

“Comments by President Trump where he appeared to suggest that Vietnam could be next in line to face U.S. tariffs are an obvious threat,” Capital Economics said.

The GSO said Vietnam’s economic growth, however, might be dragged down by a slowdown in public investment and an African swine fever outbreak that has hit farms in almost all of the country’s 63 provinces.

Vietnam targets economic growth of between 6.6% and 6.8% this year.

“We expect growth to remain strong, thanks in large part to a booming export sector,” Capital Economics said in the note, adding that it raised its forecast on Vietnam’s GDP growth for this year to 7.0% from 6.5%. (Reporting by Khanh Vu and Phuong Nguyen; Editing by Stephen Coates and Gopakumar Warrier)

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