Economic Sector

Last updated: Wednesday, May 15, 2019


Global Economic Growth to Soften in 2019

Posted: Wednesday, February 20, 2019

The World Bank forecasts that the global economic growth is projected to soften from a downwardly revised 3% in 2018 to 2.9% in 2019 amid rising downside risks to the outlook. Economic growth in Vietnam has proven resilient despite weakening external conditions. However, over the medium term, in line with the global trend, Vietnam will see a slower pace - 6.6% and 6.5% in 2019 and 2020, respectively.

Strengthening contingency planning, facilitating trade
According to the Global Economic Prospects released by the World Bank (WB) in January 2019, growth among advanced economies is forecast to drop to 2% this year. Slowing external demand, rising borrowing costs, and persistent policy uncertainties are expected to weigh on the outlook for emerging market and developing economies. Growth for this group is anticipated to hold steady at a weaker-than-expected 4.2% this year.

The upswing in commodity exporters has stagnated, while activity in commodity importers is decelerating. Per capita growth will be insufficient to narrow the income gap with advanced economies in about 35% of emerging market and developing economies in 2019, with the share increasing to 60% in countries affected by fragility, conflict, and violence.

A number of developments could act as a further brake on activity. A sharper tightening in borrowing costs could depress capital inflows and lead to slower growth in many emerging market and developing economies. Past increases in public and private debt could heighten vulnerability to swings in financing conditions and market sentiment. Intensifying trade tensions could result in weaker global growth and disrupt globally interconnected value chains.

Ms. Ceyla Pazarbasioglu, World Bank Group Vice President for Equitable Growth, Finance and Institutions, said, “As the outlook for the global economy has darkened, strengthening contingency planning, facilitating trade, and improving access to finance will be crucial to navigate current uncertainties and invigorate growth.”

“Designing tax and social policies to level the playing field for formal and informal sectors as well as strengthening domestic revenue mobilization and debt management will be important priorities for policymakers to overcome the challenges associated with informality in developing economies,” said Mr. Ayhan Kose, Director of the World Bank Prospects Group.

Notably, East Asia and Pacific remains one of the world’s fastest-growing developing regions. Regional growth is expected to moderate to 6% in 2019, assuming broadly stable commodity prices, a moderation in global demand and trade, and a gradual tightening of global financial conditions. Growth in China is expected to slow to 6.2% this year as domestic and external rebalancing continue. The rest of the region is expected to grow at 5.2% in 2019 as resilient demand offsets the negative impact of slowing exports.

Vietnam’s economy in 2019: Accelerating and breaking out
2019 is a special year for Vietnam. Top leaders of the Party, the State and the Government all affirm that this year must be a year of accelerating and breaking out, striving to achieve the highest results.

The recent Resolution 01 of the Government has partly revealed the growth outlook in 2019.

Accordingly, the Government targets a GDP growth of 6.8%, the high end of the target growth of 6.6 - 6.8% set by the lawmaking National Assembly. Consumer price index (CPI) growth will be kept at lower than 4% instead of about 4%. Total social investment value to GDP is 34% and the trade growth is 8-10%, higher than the goal assigned by the National Assembly. The export value of agricultural, forest and aquatic products is US$42-43 billion and the service retail growth is 12%.

As for the State budget, the Government expects to collect 5% more than the congressional target and keeps the tax debt at 5%. Budgetary discipline will be tightened further, regular spending is kept at 63-63.5%, lower than the congressional target of 64%, and budget deficit to GDP is less than 3.6%. The Government also strives to bring public debt to GDP to 61.3%. Non-performing loan ratio of commercial banks is below 2% and the NPL ratio of the whole system is below 5%.

The economic growth rate set by the Government is similar to forecasts made by domestic and foreign institutions.

The Asian Development Bank (ADB) forecast that Vietnam’s economy will grow 6.8% in 2019.

According to WB, economic growth in Vietnam has proven resilient despite weakening external conditions. However, over the medium term, in line with the global trend, Vietnam will see a slower pace - 6.6% and 6.5% in 2019 and 2020, respectively.

Vietnam's economic outlook report released by ANZ Bank estimated that the country’s GDP growth in 2019 is 7%. The lender said Vietnam may have certain benefits from U.S. - China trade tensions, especially in the export sector.

However, ANZ believed that Vietnam's economy will face many challenges in the short term, such as keeping inflation at the target level, reining in credit growth and strengthening balance sheets in the financial sector.

Quynh Chi

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