An automatic cotton towel production chain at the Hanosimex’s factory in the Dong Van 2 Industrial Park, northern Ha Nam province. (Photo: VNA)
Hanoi (VNA) - Vietnamexperienced a relatively stable macroeconomic situation in 2017, in accordancewith general global economic trends, but experts warned there will be obstaclesto maintaining such momentum in the turbulent environment of 2018, according toa report by the Vietnam Institute for Economic and Policy Research (VEPR).
Announced at a workshop onJanuary 16 by VEPR Director Nguyen Duc Thanh, the independent assessmentreport affirmed key 2017 economic successes across sectors, mainly due toincreases in exports, investment and domestic consumption.
He forecast that Vietnam’s 2018economic growth rate will be 6.65 percent. This is within the 2018 targetedrange, as passed by the National Assembly (NA), between 6.5 and 6.7 percent.
With current favourableconditions maintained, other NA yearly objectives including an export growthrate from 7 to 8 percent and average consumer price index of 4 percent are alsowithin reach, said Thanh.
Achievements such as the GDPgrowth rate of 6.81 percent, exceeding the National Assembly’ annual target,improvements in the manufacturing and agriculture sectors and recovery of theservice sector were also noted.
Speaking at the event, Truong DinhTuyen, former industry and trade minister, attributed such macroeconomicstability to the Government’s determination to enact institutional investmentenvironment reforms.
In the same vein, Le Dang Doanh,former Director of the Central Institute for Economic Management (CIEM), saidthat contrary to inflation forecasts in 2017’s last quarter, the State Bank of Vietnam’s(SBV) flexible and prudent monetary policy proved to be effective in curbingmarket prices.
Nonetheless, Doanh warned thatthe high budget deficit and public debt will continue to seriously hinder theeconomy. While public investment is still limited, high recurrent expenditureswill be a burden on the State budget in 2018, he added.
Prominent economist Vo TriThanh commented that monetary policy would continue to be tightened, despitethe SBV’s pledges to loosen. Still, stable systematic liquidity facilitates lowinterbank interest rates.
Meanwhile, economist Nguyen Tri Hieu wasconvinced that in 2017 the Vietnamese credit sector focused largely on industryand trade, gobbling 78.4 percent out of total credit. This partly explains theimpressive growth in the manufacturing sector as well as in the service sector.
However, he was worried that asthe country’s 2017 credit-to-GDP rate was around 135 percent, higher than othercountries with similar levels of development and approaching previousinstability levels. He said this could lead to the disruption of the bankingsystem’s financial balance.
Despite positive signs, thereremain potential challenges associated with macroeconomic instability in 2018,as many internal and external economic problems have yet to be thoroughlyresolved, admitted Thanh.
Economic problems that willremain dead-weight burdens to growth include low labour productivity,diminishing advantage of cheap labour due to the 4.0 industrial revolution’simpact, declining mining output, stagnation in the manufacturing andagricultural sector, increasing budget deficits and public debt.
Dependence on the world economyand the foreign invested sector also creates many major uncertainties for Vietnam in2018, relating to geopolitical developments and trade protectionism as well asrapid global technology changes, Thanh concluded.
As such, Tuyen suggested that asthe country stops being eligible for official development aid, foreign donorswould gradually withdraw and only provide loans at preferential interest rates.Vietnam would need to utilise internal resources as a motivation forgrowth.
The Government should takedrastic and comprehensive policy measures to tighten recurrent expenditures andimprove labour productivity in the context of the current demographic dividend,to sustain the current growth momentum, said Tuyen.
Since 2014, the VEPR’smacroeconomic reports have been published quarterly and annually with supportfrom the Konrad-Adenauer Stiftung (KAS) to discuss trending economic issues andpropose potential solutions.-VNA
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