Businesses Need Information and Boosted Restructuring for Integration

In its report with a higher macro perspective, NFSC cited better aggregate demand of the economy, particularly fast-recovery industry and commune, for their positive remarks. NFSC said total development investment capital rose 9.1 percent year on year in the first quarter, much higher than the 3.8 percent growth in the same period of 2014. Private investment jumped high, evidenced by credit growth of 2.78 percent as of April 20, compared with a slight growth of 0.53 percent a year earlier. Meanwhile, consumption actively improved. Inflation-excluded retail revenue of goods and services climbed nearly 8 percent year on year in the first four months, high than the growth rates in the same period of the three previous years (6.1 percent, 4.6 percent and 5.5 percent in Jan-April of 2012, 2013 and 2014, respectively.) According to NFSC specialists, Vietnam is entering a period of rapid and sustainable growth thanks to effectively maintained macroeconomic balances and their good effects.

 

However, in its report on Vietnamese macroeconomics, NFSC also noted some existing challenges in the economy, that is to say, slow agriculture and service growth. The agro-forestry and fisheries sector expanded 2.14 percent in the first quarter of 2015, lower than the growth of 2.37 percent in the same period of 2014. Meanwhile, exports showed signs of slowing. According to statistics, the export turnover grossed US$50.1 billion in the first four months of 2015, up 8.2 percent year on year, much low than the growth of 16.9 percent in the responding period of 2014. Meanwhile, its import value was estimated at US$53.1 billion in the reviewed period, resulting in a deficit of nearly US$3 billion, or 6 percent of total exports, higher than the target of 5 percent set by the lawmaking National Assembly.

 

According to VEPR’s first-quarter macroeconomic report, Vietnam's economy is estimated to grow 6.3 percent this year. Manufacturing industry continues to be the main driver to Vietnam’s growth. Based on employment data and industrial production index, this growth primarily comes from newly operated production lines by foreign investors in Thai Nguyen, Hai Phong, Hai Duong, Bac Ninh, Quang Nam, Can Tho and Vung Tau. Many big foreign-invested projects went into operation in the first quarter, including a project invested by LG Group of South Korea in Hai Phong City and a project by Samsung Display in Bac Ninh province. Many garment, textile, leather and footwear projects will maintain the industrial growth in 2015. The growth potential in coming years depends on FDI inflows and the resilience and strengthened involvement of domestic companies in regional production networks.

 

Although Vietnam's economy is forecast to have a high growth rate in 2015, VEPR still warned that prices will have significant impacts on the economic growth. Given the average crude oil price of US$60 per barrel, VEPR predicted Vietnam’s economic growth at 6.3 percent in 2015. Besides, prices of other basic commodities are likely to go down through 2015 but oil prices will fluctuate in a wide range, thus increasing the volatility of inflation. The inflation is forecast at 1 percent in the year given that no adjustments are made to prices of public services (health and education), tax (environmental loyalties) and fees (traffic tolls). With adjustments, the inflation may climb to 3 percent.

 

Before the above economic developments, according to VEPR, some major economic indicators set in the five-year plan from 2011-2015 may not be achieved as expected. Therefore, VEPR recommended the Government create a healthy macro-economic environment and harmonious economic institutions for long-term visions. Economic institutional reform needs more breakthroughs and actively facilitates the private sector.

 

VEPR also said that domestic enterprises must find ways to passively cope with new rules of economic integration. Thus, the force of the Vietnamese business community will become thinner when it integrates more deeply into the world economy, thus failing to shape its own competitiveness and long-term advantages. For that reason, the Government needs to create favourable conditions for the business community to have the most accesses to information sources and references to negotiation contents and have enough time for restructuring to capture opportunities in international economic integration.