"The Train Goes Downhill after it Reaches Top” is a simile by Prof Tran Tho Dat, Rector of the National Economics University, at the scientific seminar on "Vietnam economy in first six months of 2016" to portray the picture of Vietnamese economic growth against adverse factors which seemed to overwhelm positive ones. The seminar was recently held in Hanoi by the Central Economic Commission, the National Economics University and the Economic Committee of the National Assembly.
Negative growth seen in two economic pillars
Prof Ngo Thang Loi from the National Economics University said that growth tends to go up between the two quarters. In the first six months, the growth reached 5.52 per cent, with two bright spots. The trade - service sector expanded 6.35 per cent, the highest in the 2011 - 2015 period, and spiralled up over time (5.98 per cent in the first quarter and 6.68 per cent in the second quarter). The processing - manufacturing sector maintained a higher growth rate than the same period of 2015, climbing to 10.1 per cent (compared with 9.58 per cent a year ago). The processing and manufacturing industry contributed 0.73 percentage points and 0.12 percentage points to the country’s gross domestic product (GDP) growth in the first six months, respectively.
Besides, the growth structure by sector and the economic structure were more rationalised. Growth contributed by the trade and service sectors tend to rise considerably, accounting for 43.1 per cent, compared with only 35 per cent in the same period of last year. Industry made up 43.6 per cent of the growth, higher than the first quarter of 2016 (41 per cent). With a higher growth rate, the economic structure by sector evolved more positively than the same period in 2015.
However, growth seemed to slow down after the acceleration. Prof Ngo Thang Loi said although the second-quarter GDP growth was higher than that of the first quarter, the overall growth rate moderated to only 5.52 per cent in the first six months of 2016 and fell over the corresponding period of 2015 (up 6.32 per cent). This showed that the Vietnamese economy decelerated immediately after it accelerated.
He said, the downside of the first-half economic growth was the decline of mining sector and agriculture, two backbone economic sectors in Vietnam. The mining sector lost 2.2 percentage points mainly because crude and natural gas output slipped 3.7 percentage points (compared with a growth of 8.48 per cent in the same period of 2015). This is why the industrial growth was just 7.12 per cent in the first half, a considerable drop from a year earlier (with 9.36 per cent). The agricultural, forestry and fishery sector suffered a slump of 0.18 per cent, with a decline of 1.31 per cent in the first quarter and an increase of 0.36 per cent in the second quarter. According to calculations, the decline of 0.18 per cent caused the GDP to lose 0.1 percentage point.
On the other hand, the growth quality is still very low. The rapid growth depends on low value-added sectors (retailing of goods and services). Four sectors - tourism, finance and banking, real estate business, and transportation - had high added values but they made up for 15.5 per cent of the total service value.
The most important is still agricultural restructuring
According to Prof Loi, the solution for the agricultural sector is considered the most important to overcome these difficulties. Both short-term and medium-term solutions are restructuring the agricultural sector towards higher efficiency and adaptability to climate change. Accordingly, it is essential to focus on agricultural development based on large-scale agricultural production development; select and invest in crop and livestock restructuring to enhance economic value and export value; reshuffle the crop and livestock restructure to better cope with climate change.
Dr Tran Thi Van Hoa from the National Economics University said that Vietnam should focus on solving existing difficulties to promote domestic industrial production. The most important is still granting more power for enterprises to do business in Resolution 19/2016/NQ-CP of the Government on improving the investment and business environment, creating favourable conditions for investment and business operations and protecting legitimate rights and interests of investors. The next is resolving financial difficulties for private enterprises and small and medium enterprises (SMEs). SMEs should be provided further policy supports like credit to boost effective production and business operations, facilitate credit institutions to widen and diversify lending forms for them.
At the same time, it is important to ensure the disbursement and effective use of public investment. Although above half of a year has elapsed, the rate of public investment disbursement is very low in comparison with the plan, particularly funds from government bonds sold. Without urgent measures to speed up the disbursement progress, economic growth will be threatened while risks on debt rates and loan repayment obligations pile up. Besides, questions concerning new laws like the Law on Investment, the Law on Tender and the Law on Construction need to be answered. Vietnam must thus ensure funds for public investment planning. To carry out this solution, the Ministry of Finance proposed the Government consider and remove processes and procedures that prolong the execution of and disbursement for investment plans, and allow projects to use backup funds of the State Budget.
Regarding export stimulus policies, Vietnam needs to have policies to ensure consistent encouragements and incentives from production to export, forecast domestic and global market demands and price trends, and timely inform enterprises of market developments and trade barriers, she said.
Anh Lan
Vietnamese
