The topics regarding the growth target that is not reaching 6.7 per cent as set by the National Assembly, and inflation that could reach 4 per cent or less and many issues related to liquidity, were discussed at the seminar to announce the Vietnam Annual Economic Report 2016, themed "Forging New Foundations for Economic Growth", held by Vietnam Institute for Economic and Policy Research (VEPR) in cooperation with the Australian Embassy in Hanoi.
Inflation of 4 per cent
According to the report of the Vietnam Institute for Economic and Policy Research (VEPR) that is made in the context of Vietnam's economy with major turning points, we are standing at the threshold of implementing the socio-economic plans of 5 years from 2016 to 2020, but that uncertainty suggests the economy is going down in compared to 5 years ago. This is the main prerequisite for a new growth platform in the medium and long term, as mentioned in the Annual Economic Report.
According to Ass. Prof Nguyen Hong Son, Rector of VNU Economics University, the first annual economic report of Vietnam, published in 2009, targeted to summarize the economic problems fluctuated during recent years as well as make recommendations for the macroeconomic policies in the near future.
Dr Nguyen Duc Thanh, VEPR’s Director, said that Vietnam's economic platform as of the present time is still quite weak. In 2016 likely inflation will rise again. "The impact factors are due to the medical service prices that have been adjusted, resonant with the world commodity prices and the rising domestic demand that will create new pressures on prices. In addition, the tuition prices are also forecast to increase in some provinces and the gasoline prices could be adjusted to increase again. This pushes the inflation to be higher in the 2nd quarter. The inflation rate is probably fluctuating around 5 per cent and in the more cautious scenario, it would be around 4.2 per cent," said Nguyen Duc Thanh.
On the other hand, the Report has raised some factors that also made experts concerned about the economic growth forecast at 6 per cent for the low scenario in 2016, and under 6.5 per cent, even in contexts where there are many advantages. Dr Thanh stressed that the target growth of 6.7 per cent as set by the National Assembly is difficult to be achieved.
"However, he suggests the policy implications create miraculous power for Vietnam to catch up with the economic power of the region. It is necessary to build a policy framework for change. And among the three growth pillars including: productivity, creativity and capital, Vietnam should focus on creative elements and institutional innovation, and effective use of funds in the business sector," said Nguyen Duc Thanh.
Financial discipline is required
According to Mr Nguyen Xuan Thanh, Director of the Fulbright Economics Teaching Programme in Vietnam, the current world economy is in a slow growth cycle. Following the recent economic data synthesis research, the growth of the world is limited at 3 per cent. Meanwhile, the Vietnam's economy still remained above 6 per cent, which is quite high. Dr Nguyen Xuan Thanh also emphasised that if the growth diagrams are set, the growth rate could reach 7 per cent.
Dr Nguyen Xuan Thanh also recommended that if the Government continues to leverage the economy with foreign capital, the pressure of debt problems will rise. And in the long term, if the Government continues to use the investment funds as an economic momentum, this will lead to unsustainable development. And if the fiscal discipline can be maintained, the economy itself will find the market growth dynamics. And if the budget deficit is still maintained at 4 per cent -5 per cent, the economic growth will hardly go up. "What should be done right now is to reset the order and discipline of public finance," said Dr Nguyen Xuan Thanh.
Dr Can Van Luc, Economic Expert
The new growth momentum of Vietnam's economy can come from the financial markets. And the exchange rate is another vital factor. Currently, the State Bank of Vietnam is applying a feasible central exchange rate mechanism. However, in the near future, there will be a plenty of pressure as the US dollar continues to rise at the back of the recovery of the US economy, at which the interest rates will be raised. China is likely to continue to adjust their exchange rate policy in the direction of reducing the value of the yuan, which has been already overvalued in recent years. The pressures will affect our rates. Therefore, the State Bank of Vietnam requires careful calculations to adjust the exchange rate in the near future.
Dr Le Dang Doanh, Economic Expert
The concern about the East Sea regarding the development of Vietnam's economy is not reported. We will have to answer these questions. Opportunity comes very close, and a series of free trade agreements have been already put into force. But Vietnam will have to cope with issues from China, the second-largest economy of the world, which has posed challenges to Vietnam's economic growth. The environmental pollution problems that have been caused by the overnight growth will seriously affect agriculture, which requires a huge budget to "clean up". These are the institutional challenges facing Vietnam in the long term.
Anh Phuong
Vietnamese
