Vietnamese economy urged to be cautious of external shocks

Hanoi (VNA) – The Vietnamese economy needs to take caution against external shocks this year due to the global economic uncertainties, a scholar has warned.

Director of the Vietnam Institute for Economic and Policy Research under the Vietnam National University’s University of Economics and Business Nguyen Duc Thanh made the comment during a ceremony in Hanoi on January 16 to release the macroeconomic report for the fourth quarter of 2016.

The report warned of the possibility of the US Federal Reserve’s interest rate hike three times this year, which could push up the USD rate in Vietnam, thereby hurting Vietnam’s exports and deteriorating trade deficit.

In order to maintain the value of Vietnamese dong in the context of rising USD rate, the State Bank of Vietnam could increase deposit rates but this could pose risks and cause a ripple effect to the real estate sector, it said.

Another concern is that major oil producers’ production cut since January 2017 could raise oil prices again. On the plus side, it could add more revenues to the State budget but also potentially put pressure on domestic inflation which has been higher recently due to the adjustment of public service prices.

Thanh said the 6.7 percent growth target this year is high and an under-4 percent inflation is not easy to achieve, suggesting that achieving growth target be done with “patience over haste” policy in order to prevent a relaxation in stabilising the macro-economy.

The report also forecast that the economy could expand nearly 6.4 percent while inflation could reach 5.9 percent this year, with the business sector, especially manufacturing and processing, being a bright spot.

The government’s resolutions 19 and 35 are also expected to cut down cumbersome administrative procedures and support private businesses.-VNA