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Economic Sector

Last updated: Thursday, August 17, 2017

 

Vietnamese Middle-class Population Expands Rapidly

Posted: Wednesday, April 26, 2017

The Asian Development Bank (ADB) said the number of middle-class Vietnamese will double to reach 33 million people by 2030, contributing to the increase of personal expenditure and retail, and the formation of a much more appealing market for foreign investors to engage in the fields that interest them. And, the group will have an average income of US$8,500 a year.

ADB recently hosted a press conference to release the Asian Development Outlook (ADO 2017) themed “Transcending the Middle class Challenge”. According to ADB, Vietnam’s economy will grow at 6.5 per cent in 2017 and expand to 6.7 per cent in 2018.

ADB Country Director in Vietnam Eric Sidgwick is optimistic about Vietnam's economic growth in 2017 and 2018. He explained that Vietnam’s growth of 6.7 per cent in 2018 will be driven by the development of domestic manufacturing, construction, retail and wholesale, banking and tourism as a result of strong reforms lead insurance the government.

He added that Vietnam is still a favourite destination for foreign direct investment flows. According to statistics, FDI disbursement reached US$3.6 billion in the first quarter of 2017, up 3.4 per cent over the same period of 2016.

ADB chief economist Aaron Batten said the agricultural sector had a weak growth rate of 1.4 per cent in 2016 as a result of droughts. But ADB still considers this a key economic sector in the future that will help Vietnam achieve growth. Agricultural output is expected to pick up modestly in 2017 given the outlook for higher global food prices and a return to more normal weather. However, to bring agriculture into a truly sustainable growth trajectory and increase profit, the government must have more reforms making agriculture more adaptable to climate change by enhancing technology, using appropriate energy use, reducing dependency on coal and increasing the use of clean energy sources such as wind and solar energy. Furthermore, farmers need to seek and change their mindset to adopt more valuable food crops that better serve consumer tastes. If Vietnam can manage to handle agricultural challenges to achieve a 5 per cent growth, its GDP will jump 7 per cent, said Aaron Batten.

Optimistically, Vietnam has become a manufacturing hub of the region. Its manufacturing has outperformed many ASEAN countries. While most ASEAN countries saw export declines in 2016, Vietnam achieved a strong growth of 8.3 per cent. The proportion of Vietnamese exports in ASEAN expanded from 7 per cent in 2009 to 14 per cent in 2015. In particular, the share of high-tech goods jumped from 2 per cent to 12 per cent of the region’s total exports.

Vietnam also has a bright prospect for private investment. At present, the country has improved its ease of doing business ranked by the World Bank (WB). Accordingly, Vietnam’s ease of doing business climbed to the 82nd position out of 190 countries surveyed in 2017 from the 91st position out of 189 countries a year earlier. Another more convincing figure is the record number of 110,000 new business start-ups in 2016, representing an increase of 16.2 per cent over 2015. The Nikkei Vietnam Manufacturing Purchasing Managers’ Index (PMI) hit a record high in February 2017 with output and new orders increasing at faster rates and firms building their stocks of purchases at a record pace. Nonetheless, the ADB expert predicted that inflation is also projected to rise 4.0 per cent in 2017 to 5.0 per cent in 2018 as result of accelerating growth.

In addition, the ADB also expresses concerns about fiscal pressure that weighs on the economy. Mounting public debt pressure has prompted the Government to set ambitious targets for the budget deficit, 3.5 per cent of GDP in 2017 and about 4 per cent in 2018. This is also one of the most difficult challenges that the Vietnamese economy must overcome in the future. Achieving fiscal consolidation over the medium term will be challenging and require deeper tax reform, better revenue administration, and much more efficient public expenditure.

Anh Phuong

 








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