The economy continued to expand at the fastest pace since 1Q2013 with the 4Q2017 GDP at 4.0%y/y, thus bringing the full year 2017 growth to 3.9%, which fell in line with our projection. Growth came from strong exports and nonagriculture sector with stable private consumption. We expect the economy to stay healthy in 2018 supported by exports on the back of stronger global demand, tourism and government infrastructure spending, thus allowing us to maintain our 4.0% GDP projection for 2018. But the snag comes from the high household debt, NPLs and excess industrial capacity remains an issue.

While inflation is poised to stay subdued and wages weak, we expect the central bank to maintain interest rates throughout 2018 at 1.50%, which is near record lows. For the next review on the policy rate which is on March 28 which we expect the rate to remain intact at 1.50%.

Meanwhile, the headwinds in 2018 will come from the election play. Although the general election is expected to take place in November 2018, the recent delay in election bill suggests the election could be pushed to February 2019. Following the increased political noise and volatility risk, this could cause some level of discomfort amongst the foreign investors.

• The economy continued to expand at the fastest pace since 1Q2013. The 4Q2017 GDP grew 4.0%y/y from 4.3%y/y in 3Q2017. It brings the full year 2017 GDP growth to 3.9%, which fell in line with our projection, higher than 2016’s growth of 3.3%.

• Growth came from stronger exports, up 7.4%y/y from 6.9%y/y added with stable private consumption which rose 3.5%y/y from 3.4%y/y in 3Q2017. Besides, we noticed the contribution from non-agriculture sectors rose 4.6%y/y in 4Q2017 from 4.0%y/y in 3Q2017 compared to the agriculture sector which fell by 1.3%y/y in 4Q2017 from 9.7%y/y in 3Q2017. Government spending and investment rose weakly by 0.2%y/y and 0.3%y/y respectively from 1.8%y/y and 1.2%y/y respectively.

• We expect the economy to stay healthy in 2018 supported by exports on the back of stronger global demand, tourism and government infrastructure spending, thus allowing us to maintain our 4.0% GDP projection for 2018. Optimism is further reflected by the improving business sentiments which is shown by the growing numbers of newly registered companies. But the snag comes from the high household debt, NPLs and excess industrial capacity remains an issue.

• While inflation is poised to stay subdued and wages weak, we expect the central bank to maintain interest rates unchanged in 2018 at 1.50%, which is near record lows. The central bank has maintained the 1.50% policy rate since April 2015. For the next review on the policy rate which is on March 28 which we expect the rate to remain intact at 1.50%.

• Meanwhile, the headwinds in 2018 will come from the election play. Although the general election is expected to take place in November 2018, the recent delay in election bill suggests the election could be pushed to February 2019. Following the increased political noise and volatility risk, this could cause some level of discomfort amongst the foreign investors.

Source: AmInvest Research - 20 Feb 2018