Vietnam’s economy grew at the fastest pace in Asia this year, signaling momentum just before risks from a global slowdown began to materialize.

Gross domestic product rose 8.02% in the year to December, according to official data reported Thursday. That was faster than the government’s initial target of 6%-6.5% growth and was aided by a quicker-than-expected 5.92% expansion in the final quarter.

Manufacturing, which grew 8.1% during the year, was the main driver of economic growth, according to Nguyen Thi Huong, head of Vietnam’s General Statistics Office. Strong improvement in services also supported growth.

The nation’s main stocks index was little changed after the data at 9:19 a.m. local time.

The better-than-expected showing gives Vietnam’s central bank the space to wait-and-watch before deciding to pivot monetary policy away from tightening. While the authority has raised the benchmark rate by 200 basis points in two moves this year to 6%, looming fears of debt default in Vietnam’s property-sector has given reason for concern about a China-style growth hit.

KEY DETAILS FROM THURSDAY’S DATA:
Manufacturing increased 8.1% at the end of December from a year earlier, compared to 6.37% at the same time last year December exports dropped 14% from a year ago, while imports fell 8.1% Consumer prices rose 4.55% in December from a year earlier. The government targets to cap average price gains at 4% this year Disbursed foreign direct investment estimated up 13.5% this year to $22.4 billion

 

While Vietnam “is performing well amid uncertainties in the global economy, risks to the economic outlook have become elevated,” the Asian Development Bank said in a Dec. 14 statement. “Though trade continues to expand, signs show weakening global demand for the country’s exports,” it said. 

ADB forecasts Vietnam’s 2023 growth to be 6.3% as major trade partners see a slowdown. 

The weakness was already evident in the headline trade data. Exports declined 14% from a year ago in December, the second straight month of fall. Retail sales during the month rose 17.1%, while credit growth improved 12.9%. 

That was accompanied by consumer price growth of 4.55% from a year ago in December. Core inflation, which excludes prices of food, fuel, healthcare and education services, climbed at a faster rate of 4.99%.

Vietnam will struggle to keep inflation in check next year, according to Bui Thuy Hang, the central bank’s deputy head of monetary policy department. The country will face consumer price increases, with inflation forecast at about 5% in early 2023, higher than the government’s full-year target of 4.5%, Hang told an economic forum in Hanoi on Dec. 17.