As Uncertain as GDP?

Target GDP or gross domestic product only calculate resident units in the territory of Vietnam, but we often forget that what a country really enjoys is gross national income (GNI) and net domestic income (NDI), not only a “frivolous” target like GDP.

 

He added that the GSO Yearbook presents not only GDP data but also GNI data but unfortunately hardly anyone or a very few people use this indicator in their researches or reports. This indicator reflects a more accurate value that a country enjoys.

 

Currently, economic situation assessments are often tied to GDP. In Vietnam, GDP is not only computed but also perceived as a notion of the supply side, that is to say, summing all added values of all sectors of the economy and import duties according to resident principles.

 

Mr Nguyen Viet Phong, a specialist at the Deposit Insurance of Vietnam (DIV), said, current GDP target is not in essence. Specifically, Vietnam’s socioeconomic assessment is often closely tied to GDP growth targets. Meanwhile, GDP is the sum of the entire added value of all sectors of the economy and import duties. This means that a foreign direct investment (FDI) enterprise operating in the territory of Vietnam in one year, the total value added in that year they will be counted for Vietnam’s GDP. Meanwhile, if that enterprise has a profit from exploiting Vietnam’s natural resources and it will transfer its profit to its home country, that profit however is still counted for Vietnam’s GDP. So, GDP does not portray the full picture of economy.

 

Dr Vu Thanh Tu Anh, Research Director at the Fulbright Economics Teaching Programme, said, among four growth engines, three internal engines - State-owned economic sector, private economic sector, and agriculture - are in trouble. Only the “external engine” - FDI sector - is running well. This is beneficial to little-significant criterion - GDP growth while it makes GNI growth lower and lower than GDP growth and reduces “savings” of the nation. If inward remittances are excluded, this rate accounts just some 20 percent of GDP.

 

Based on actual prices in 2012, GNI increased six times over 2000. If GDP deflators are taken into account to eliminate price elements of NDI, GNI rose only 2.15 times. In 2000 - 2006 period and 2007 - 2012 period, the average growth of GDP and GNI in two stages were respectively 7.5 - 7.4 percent and 5.9 - 5.3 percent. This showed that the gap between GNI growth and GDP growth widened. If the ratio between GNI and GDP was 99 percent in 2000, it was down to 94 percent in 2011, meaning that cash outflows were increasing and GNI got smaller small relative to GDP.

 

Since 2011 “internal engines" of the economy have weakened, only "external engine" has run well. This means GDP growth is benefited while the country’s resources become increasingly depleted. Is this an outcome of easygoing and disoriented FDI attraction? And do we attach to much importance to GDP target and forget that what Vietnam finally enjoys is GNI.