Economic Sector

Last updated: Tuesday, March 26, 2019


Growth Still Robust in 2019-2020

Posted: Sunday, December 23, 2018

In its report released on December 12, the National Centre for Socioeconomic Information and Forecast (NCIF) under the Ministry of Planning and Investment forecast that Vietnam’s economic growth will reach 7 per cent in 2018 and 6.9-7.1 per cent in 2019-2010.

High but unsustainable growth
Although the growth is higher than earlier forecasts, experts pointed out that growth quality improvement has not produced desirable outcomes. The economic growth is still driven by capital. Labour productivity improves but remains low. Manufacturing and processing heavily depends on the foreign-invested sector. The outcome of the business environment improvement is not clear.

Dr Dang Duc Anh, Director of NCIF’s Analysis and Forecast Bureau, said that the growth was mainly driven by the service sector in 2016 - 2018. Vietnam’s economy has no backbone industry. This shows that there is no improvement in economic competitiveness. The share of the foreign direct investment (FDI) sector increases while the share of the domestic sector decreases. Traditional investors come mainly from Asia or Southeast Asia. Labour productivity has not improved much. In particular, public debt tends to decrease but sovereign debt swells up rapidly, resulting in rising direct debt repayment in the coming time.

Dr Tran Toan Thang, Director of NCIF's World Economic Committee, added that the Vietnam’s economy is experiencing many implications like exchange rate and stock volatility. At the same time, the complex world trade has exerted an effect on Vietnam’s economy as well, like rising US trade deficit, unclear FDI flow from China, Brexit movement, and impacts of bilateral and multilateral trade agreements like Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Two scenarios for 2019-2020
Unlike other forecasts that Vietnam’s economic growth will moderate to 6.5 - 6.6 per cent in 2019 - 2020, NCIF has two scenarios economic growth: 7 per cent for basic scenario and 7.2 per cent for high scenario.

Ongoing macroeconomic stability, FDI attraction, economic restructuring and free trade agreements enforcement will support economic growth, said Dr Dang Duc Anh. These factors make NCIF believe in above 6.9 per cent GDP growth rate next year. Private sector development, institutional reform, science and technology, and labour productivity growth are driving forces of our country's economic growth not only in 2019 - 2020 but also until 2025.

However, NCIF researchers noted that Vietnam will face many risks in the phase of 2019-2020 as the economic growth has been more and more dependent on FDI enterprises. This sector has concentrated on some major products, so economic growth will be seriously affected when there are lawsuits or trade conflicts.

Besides, the credit growth and money supply are at high levels. If being prolonged, that will pose latent risks to national debts and macroeconomic instability. National financial openness is higher than that of the economy. High public debt and huge repayment obligations also affect macroeconomic management and the likelihood of interest rate cuts.

Other impact factors on future macroeconomic stability are rising price of electricity, environmental protection tax and health service as the government proceeds with the process of liberalisation and adjustment of public service prices.

Nguyen Thanh

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