Big year ahead for economy

January 17, 2019 | 08:00
With the Vietnamese economy producing an 11-year record in growth with 7.08 per cent last year, high-profile international organisations are seeing the country as a big highlight in Asia, with strong prospects to growth further in 2019. Thanh Dat reports.
big year ahead for economy
Vietnam is promoting a new wave of investment in the country for the year ahead, Photo: Le Toan

Ousmane Dione, the World Bank’s country director for Vietnam, was impressed by Vietnam’s achievements in 2018, especially the country reaching the growth rate of 7.08 per cent, which is the highest growth rate since 2008.

“I am also impressed by the country’s continued macroeconomic stability. Such a big achievement is not easy to gain, especially in the context of the current complicated international situation, and Vietnam’s internal challenges,” Dione said. “If the challenges are addressed, Vietnam can reach a growth rate of 6.8 per cent or even more in 2019.”

Last November the National Assembly set the target of 6.6-6.8 per cent for 2019.

According to Minister of Planning and Investment Nguyen Chi Dung, both the World Bank and the Asian Development Bank (ADB) are applauding Vietnam’s impressive growth, coupled with improved growth quality. “According to the World Bank, Vietnam is among the top growing nations in the world,” Minister Dung said.

Under a World Bank report on Vietnam’s economic performance released last month, the country is projected to climb 6.6 per cent in 2019, with growth continuing “to be underpinned by robust domestic demand, reflecting strong private consumption and investment growth.”

Meanwhile, the ADB also forecast 6.8 per cent growth for Vietnam in 2019.

Minister Dung said that Vietnam is on the right track, but the government still needs to give the business community better incentives and policies so that they can enjoy a level playing field in the country. “Efforts must be made to achieve a growth rate even higher than in 2018, and many international organisations value highly the Vietnamese economy’s growth potential,” he stressed.

Last week, Trading Economics, which offers a database of 20 million economic indicators about 196 countries, released its annual GDP growth forecast for Vietnam, expecting 6.9 per cent by the end of this quarter, rating it among Asia’s top performers.

“Looking forward, we estimate the rate to stand at 7.1 per cent in 12 months’ time,” said the firm.

Spain-based FocusEconomics, which provides in-depth economic analysis globally, told VIR that under its fresh survey on the performance of Southeast Asian economies, Vietnam is expected to continue being among the top performers.

The country is expected to grow 6.6 per cent in 2019, far higher than almost all nations in the region, including Indonesia (5.2 per cent), Thailand (3.8 per cent), Malaysia (4.6 per cent), the Philippines (6.4 per cent), and Singapore (2.6 per cent). Vietnam’s expected growth rate for 2019 will also be higher than that of the whole Southeast Asian region (4.9 per cent), and Asia (excluding Japan) (5.8 per cent).

“The economy should continue to advance at a quick clip in 2019,” FocusEconomics said. “Strong fixed investment and solid consumer spending, supported by low unemployment and a growing tourism sector, should support growth. Meanwhile, greater economic integration within the ASEAN and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership should buttress the external sector and boost foreign direct investment (FDI) inflows.”

In 2018, Vietnam’s total disbursed FDI hit $19.1 billion, up 9.1 per cent on-year. Besides, total foreign-related stake acquisitions reached $9.89 billion, up 59.8 per cent on-year.

Fitch Solutions, in its latest report on Vietnam released over a week ago, projected that the country’s GDP will grow by 6.5 per cent in 2019.

“We believe that the Vietnamese manufacturing sector and economy will continue to outperform the region over the coming quarters,” the firm said, expecting the manufacturing sector to remain a key economic driver and to outperform the region.

Vietnam has grown to become a manufacturing powerhouse – particularly in electronics – due to its relatively cheap and large labour force, geographical advantages, attractive tax breaks, stable political environment, and open-door trade policies.

“The opening of the Vietnamese economy also came at an opportune time, as China had begun to shift away from lower-end and export-oriented manufacturing to focus more on the domestic economy, allowing the former to gain market share,” Fitch Solutions said.

Useful hints

Prime Minister Nguyen Xuan Phuc stated that 2019 will be a year of “Speeding up and making big breakthroughs” in all sectors of the economy, and “All efforts must be made to reach the highest results.” “In 2019, to reach all goals, our motto will be ‘Rule, integrity, action, creativity, effectiveness, and breakthrough,’” he said.

Echoing this, Dione from the World Bank suggested that to get higher growth with improved quality, Vietnam needs to accelerate economic reforms, which remain slow now.

Under the World Bank report, though Vietnam is rated among the top five performers in the ASEAN, it continues to score below several regional nations. Benchmark scores where Vietnam continues to be below ASEAN-4 (Indonesia, Malaysia, the Philippines, and Thailand) include resolving insolvency, paying taxes, and cross-border trade. The bank suggested that continuing reforms to improve regulatory quality and eliminate red tape remain important priorities. In addition to improving regulations on paper, it is crucial to ensure consistent, efficient, and fair enforcement.

The government on November 9, 2018 issued Resolution No.139/NQ-CP to set the target of cutting or simplifying at least half of business conditions and requirements in the areas of investment, land, construction, tax payment, and social insurance for Vietnam to reach the average Ease of Doing Business score of the ASEAN-4 countries by 2020.

“Pursuing greater macroeconomic resilience and enhanced competitiveness would support long-term growth prospects,” the report said. “Policymakers should take advantage of the still favourable growth dynamics to advance structural reforms, including the state-owned enterprise sector and the banking sector, along with improving efficiency in public sector investment, which would boost productivity and potential output and support strengthened service delivery.”

Policies that strengthen trade facilitation would enhance Vietnam’s export competitiveness, which, along with stepping-up the pace of reforms to support the business enabling environment, would further bolster investment activity, including foreign investment.

Meanwhile, according to the ADB, Vietnam’s economic growth will likely hold up fairly well in the near term thanks to continued strength in domestic demand. However, growth moderation in the European Union, Japan, and China could dent export opportunities for Vietnam, as could escalating trade frictions around the world that threaten to disrupt global value chains and production networks in which Vietnam is tightly integrated, the ADB said.

The Vietnam Economic Forum 2019 is scheduled to take place in Hanoi on January 16-17, 2019 under the theme of “Strengthening the fundamental drivers for rapid and sustainable economic development.”

Organised by the government and the Party Central Economic Commission, the event will cover a plenum and high-level policy dialogue, and three specialised workshops, namely “Infrastructure development, financing, and governance in Asia,” “Climate change adaptation and energy security for sustainable development,” and “Digital economy development in the context of Industry 4.0: Opportunities and challenges for Vietnam.”

In detail, Workshop 1 will provide participants with an overview of recent trends of public investment and public-private partnership in Asia. It will introduce a comprehensive framework for infrastructure governance covering the whole public investment cycle. This session will focus on Vietnam and discuss the government’s recent endeavours in the field of infrastructure development, as well as ongoing infrastructure governance reforms.

Workshop 2 will focus on the impacts of climate change on the Vietnamese energy sector. Changes in temperature, precipitation, sea level, and the frequency and severity of extreme climate events will affect how much energy is produced, delivered, and consumed.

Meanwhile, Workshop 3 will be aimed to discuss the impacts of artificial intelligence (AI) on the economic sectors, including high tech and telecom, transportation and logistics, manufacturing and assembling, banking and financial services, healthcare, and agriculture. The workshop will also discuss the key areas for Vietnam to focus on to develop AI in the time to come.

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