The Vietnamese economy is facing three major challenges, including a slump in agricultural growth, the Minister of Planning and Investment, Bui Quang Vinh, said after a meeting with the Interministerial Steering Committee on June 25.

The Ministries of Finance; Planning and Investment; and Industry and Trade, as well as the State Bank of Vietnam came together to discuss the management and governance of the economy in the second quarter of 2015.

Last year, the agricultural sector accounted for 3.44 percent of the country’s GDP. However, during the first six months of this year, the sector only grew by 2.17 percent, he said.

The minister attributed this to droughts in the central region as well as struggling seafood exports, which significantly impacted on agricultural production and exports.

He also pointed out that trade deficits had resurfaced this year after three years of surplus. The deficit reached 4.7 percent during the January-June period, close to the annual limit of 5 percent set by the National Assembly.

A trade deficit exceeding 5 percent would lead to an imbalance in foreign currency payment and a decline in Vietnam ’s surplus of foreign currency holdings. This could even put pressure on exchange rates, which would affect the economy at large, the minister warned.

In order to solve the problem, he said it was crucial to boost exports, especially agricultural products, while strictly controlling imports, particularly luxury goods, by establishing a technical barrier.

Another challenge to the economy and domestic production is posed by smuggling and counterfeit goods, the minister continued.

He noted that FDI currently plays a large role in the manufacturing and processing industries that contribute significantly to national economic growth, GDP and exports. However, only the development of a strong domestic sector can boost Vietnam’s trademark and help the country’s economic independence, he said.

He suggested continuing the implementation of Resolution 19 on improving the business environment by establishing a competitive market and creating favourable conditions for investors as well as foreign workers in Vietnam, while rolling out measures to put an end to smuggling in an effort to support domestic production.

The minister also revealed that State budget collection in the first and second quarter of this year exceeded its target. He explained that although a drop in global fuel prices affected oil exports, it benefitted other sectors by reducing their input costs.-VNA