GDP growth target of 6.5-percent remains major challenge: Deputy Minister

Illustrative photo. (Source: VNA)

Hanoi (VNA) – Vietnam's gross domestic product (GDP) growth in the first quarter of 2021 was 4.48 percent, lower than the 5.2 percent scenario projected for the “new normal” situation, said Deputy Minister of Planning and Investment Tran Quoc Phuong, noting that this adds more pressure on the remaining months of this year so the target of 6.5-percent growth can be achieved.

He attributed the COVID-19 outbreak in the northern province of Hai Duong, which hit multiple industrial parks, to the low economic growth in the first quarter. To reach a 6.5 percent growth rate for the whole year, the remaining quarters must post higher growth rates, even exceeding 7 percent and it is a major challenge, requiring great focus, Phuong said.

Though new COVID-19 variants are making the pandemic develop more complicatedly, Vietnam’s macro-economy remains stable in all sectors, according to the Q1 report by the General Statistics Office (GSO).
 
The Industrial Index of Production(IIP) expanded 5.7 percent year on year; gross investment rose by 6.3 percent; and trade surplus reached 2.03 billion USD with export revenues and import turnover climbing 22 percent and 26.3 percent, respectively, during the reviewed period. Total retail sales of goods and services also increased 5.1 percent.

These are positive signs against the backdrop of slower-than-expected global economic recovery and delays in COVID-19 vaccine rollout, said economist Can Van Luc.

The GSO reported that the agro-forestry-fishery sector picked up 3.16 percent year on year while industry and construction, and service sectors grew by 6.3 percent and 3.34 percent, respectively.

Illustrative photo. (Source: VietnamPlus)

Processing and manufacturing continued to be the main growth driver of the economy, surging 9.45 percent, Luc said, commenting that the growth of the agriculture and industry sectors are modest but that of tourism is below expectation.

Echoing Luc’s view, Deputy Minister of Planning and Investment Tran Quoc Phuong said processing and manufacturing accounts for the largest share of GDP, so it is critical to revive this industry more strongly to gain higher growth in the coming quarters. Phuong said he pins high hope on production of steel sheets, and phone and TV parts.

It is challenging to boost the service sector, however, technology, financial and insurance services are growing well, he noted.

The deputy minister also highlighted six products posting more than 1 billion USD in export revenue in March, including wood, textile and garment, footwear, electronics, phones and machinery.

Luc expected recovery signs will be more visible in the coming time, and with the country's new leadership, the GDP growth would reach 6.7 – 7 percent this year.

Both pointed out challenges facing an open economy like Vietnam in the second quarter of the year, given many uncertainties in the global economy.

Phuong said the macro-economy was stable in the first quarter of 2021 with the Consumer Price Index (CPI) edging up only 0.29 percent, much lower than projected. But the inflationary pressure is likely to mount in the remaining months of the year. Factors possibly driving up the CPI include prices of fuels and public educational and healthcare services.

Illustrative photo. (Source: VietnamPlus)

The Q1 inflation normally increases sharply because of rising domestic demand during the Tet (Lunar New Year), the biggest holiday of the year in Vietnam, Luc explained, but this year, the figure dropped to the lowest in 20 years as a result of weakening demand induced by the COVID-19 outbreak.

He also forecast the inflation will increase during the remaining months, saying the global economic recovery will cause prices of necessities and fuels to rise; and many countries, including Vietnam, will see higher money supply as a result of support packages to boost the economy.

The CPI is likely to pick up by around 3.6 – 3.8 percent this year, he said.

Luc recommended the government to make more drastic institutional reforms and innovation and better foster digital transformation among enterprises. The business environment must be further improved with more simplified public administrative procedures, he noted./.