EU trade deal would help Vietnam

“The deal would help to boost foreign investment, productivity and exports, strengthening potential growth and external accounts,” Fitch said in a report released this week.
The FTA would eliminate almost all tariffs over a 10-year transition period, with most tariffs being removed once the agreement comes into effect.
The agreement would also open up parts of the Vietnamese services sector – including financial services – to European investment.
Fitch said Vietnam was already benefiting from strong external balances and relatively high growth rates of real gross domestic product. The average real GDP growth in the 2010-14 period was 5.9 per cent, versus a “BB” country median of 4.5 per cent, while Vietnam posted a current-account surplus of 4.5 per cent of the GDP in 2014 versus a peer median deficit of negative-1.3 per cent. External accounts are further strengthened by strong and stable inflows of foreign direct investment, with the net FDI totalling 3.9 per cent of the GDP (US$7.2 billion).
“The European Union countries, together, are Vietnam’s second-largest trading partner after China, with Vietnam benefiting from a substantial goods-trade surplus with Europe.
Further lowering of trade and investment barriers should help support Vietnam’s rapidly growing exports sector, and promote further FDI inflows,” Fitch said.
Vietnam’s exports to the EU were reportedly worth $27.9 billion (Bt983 billion) in 2014, up by roughly 15 per cent from 2013.
“Notably, too, Vietnam remains in the negotiations for the Trans-Pacific Partnership free-trade agreement with 11 other Pacific Rim countries, including the United States and Japan. Should the TPP be passed, Vietnam will have concluded free-trade agreements with three of its top four export destinations.”
Fitch expects Vietnam’s improved macroeconomic stability and external accounts to remain a key support for its sovereign credit profile.