High Prospects for Growth of 5.8 Percent in 2014

According to the NFSC, GDP growth in the first quarter of 4.96 percent was higher than that of the same period two years ago thanks to the recovery of the agriculture, forestry and fishery sector and industry and construction sector. In particular, considering seasonal factors in quarterly GDP growth, it can be seen that growth has continued to increase since the second quarter of 2013 after falling continuously from the first quarter of 2011. This trend is forecast to continue in the last 3 quarters of 2014.

 

The NFSC assumes there is an important sign that in the first quarter of 2014, production continues to see positive changes. Industrial production index, especially that of processing and manufacturing industry, has continued to accelerate since the second quarter of 2013. In addition, the purchasing managers’ index (PMI) of February 2014 shows the expansion of production (above 50) for 6 consecutive months. In particular, output continuously increased, finished goods inventory sharply decreased and consumption of goods in production inputs increased. Imports of raw materials, fuel, machinery and equipment for production have continued to increase since September 2013 and rose sharply in the first quarter of 2014, particularly machinery and equipment imports increased by 29.3 percent, fuel 29.6 percent, textile raw materials 28.7 percent. Exports also remain the driving force for growth when in the first quarter, Vietnam reached US$1 billion of trade surplus, increasing by 44.5 percent compared to the same period last year and being the largest trade surplus since 2010.

 

Another bright spot in the socio-economic picture is stable macroeconomic environment and inflation at a low level. The CPI by the end of the first quarter rose 0.8 percent compared with the end of 2013 and 4.83 percent over the same period last year, the lowest growth rate since 2005. Decreased Inflation facilitates reduction in interest rates, contributing to the growth of credit and lowering financing costs for businesses.

 

However, the NFSC said that although the economy has had positive change, aggregate demand is slowly improving. Accordingly, consumption remains slow as retail sales of goods and services in the first quarter, excluding the factor that price increased by only 5.1 percent, are not much higher than that of the same period 2 years ago (first quarter of 2012 being 5 percent and first quarter of 2013 4.5 percent). Economic growth, therefore, is still low compared to the potential of the economy.

 

Facing this development, the NFSC proposed that along with the implementation of restructuring measures to promote economic growth in the long term, it is essential to support aggregate demand of the economy, clear goods consumption marker; support farmers on agricultural prices, lower interest rates and continue to support businesses and producers to access bank loans. Besides, on the basis of annual inflation target, it is also important to actively regulate prices of basic commodities, services and rates as well as to regulate aggregate demand of the economy through monetary and fiscal policies appropriately to reach the set inflation target.