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By Khanh Vu
HANOI, March 29 (Reuters) - Vietnam’s economy grew at a slower pace in the first quarter as weakening global demand for smartphones weighed on exports, government data showed on Friday.
Gross domestic product grew 6.79 percent in the January-March period, slower than 7.31 percent in the December quarter, and compared to 7.45 percent in the first quarter last year, the General Statistics Office (GSO) said.
Processing and manufacturing grew 8.63 percent, while services rose 6.50 percent and agriculture gained 2.68 percent, the GSO said.
“The economy is still facing numerous difficulties and new challenges,” the GSO said in a statement.
Exports of smartphones, the country’s biggest export earner and mostly produced by South Korea’s Samsung Electronics, fell 4.3 percent from a year earlier to $12.05 billion in the quarter, the GSO said.
“The global smartphone market has been witnessing a decline over the past few years, and like most other markets, Vietnam has been inevitably affected by this slowdown,” said Kim Yang-jae, an analyst at KTB Investment & Securities.
Samsung, which invested more than $17.3 billion in eight factories and a research and development centre in Vietnam, is the largest single foreign investor and accounts for more than one-fifth of Vietnam’s total exports.
Overall, Vietnam’s exports in the first quarter rose 4.7 percent from a year earlier to $58.51 billion, much slower than an annual expansion of 24.5 percent in the same period last year.
Capital Economics gave a subdued growth outlook, pointing to weaker exports and tighter fiscal policy in the form of slower spending and higher taxes to tackle a large public debt and budget deficit.
“Weaker global demand and a downturn in the technology sector have contributed to slowdown in export growth over the past few months, and are likely to weigh on exports over the next couple of quarters,” the agency said, forecasting 6.0 percent growth for this year and 2020.
Vietnam’s GDP grew by 7.08 percent last year, the quickest pace since 2011 and faster than an expansion of 6.81 percent in 2017.
The government has targeted economic growth of between 6.6 percent and 6.8 percent this year.
While manufacturing slowed this quarter compared to 8.85 percent growth in the December period, analysts say Vietnam could benefit if the U.S.-China trade war drags on.
Vietnam and Thailand are emerging as preferred destinations for global companies seeking to shift production and supply chains out of China.
Vietnam’s consumer price index in March rose 2.7 percent from a year earlier, led by an increase in the cost of food and education services, the GSO said. (Reporting by Khanh Vu; Additional reporting by Heekyong Yang in Seoul; Editing by Darren Schuettler)