Strong optimism in growth forecasts

Vietnam is expected to grow at almost 7 per cent next year by most accounts, Photo: Le Toan

The World Bank last week released a fresh forecast that the economy “is expected to grow at close to 6.8 per cent in 2018,” higher than the government’s expectation of 6.7 per cent and up from 6.5 per cent forecast by the bank in April. It also projected that the economy will grow by 6.6 and 6.5 per cent in 2019 and 2020.

“Growth continues to be underpinned by robust domestic demand, reflecting strong private consumption and investment growth,” said the update on the country’s economic development.

Meanwhile, the Asian Development Bank (ADB) last week also released a forecast for the East Asia and Pacific region, with Vietnam’s growth projected at 6.9 and 6.8 per cent for 2018 and 2019, respectively. These rates are the second-highest in the ADB’s report, after India, buoyed by solid performances in agriculture, industry, and services.

Spanish financial data firm FocusEconomics told VIR that Vietnam’s outlook for 2019 “remains extremely favourable, with growth set to be supported by strong private consumption and fixed investment.”

Although rising global trade protectionism is generating uncertainty, Vietnam is in a position to benefit from diverted foreign direct investment inflows and relocated production facilities from China, FocusEconomics said. They added that its estimated industrial output will grow by a healthy 9 per cent in 2019, reflecting the economy’s surging production and demand.

FocusEconomics projected the economy to expand 6.7 per cent in 2018, and 6.6 per cent in 2019, and 6.3 per cent in 2020.

The National Centre of Socioeconomic Information and Forecast released two optimistic growth scenarios. Under the first, the rate will be 6.83 per cent this year and 7.01 next year, while under the second scenario, the rates will be 6.9 and 7.1 per cent, respectively.

The key driving forces are the continued rise in production, rising confidence thanks to the government’s pro-business policies, and Vietnam’s commitment to implement free trade agreements which will give enterprises more opportunities to invest and export.

“In 2018, the economy will accomplish four and exceed eight targets set by the National Assembly,” said Luong Van Khoi, vice head of the centre, at last week’s seminar in Hanoi on Vietnam’s economic outlook.

He noted that the economy in 2019 will continue benefitting from optimistic prospects of global economic and trade growth, a stable macroeconomic environment, and businesses’ growing confidence.

According to the General Statistics Office (GSO), the economy in the first 11 months has remained on track, with the manufacturing and processing sector (which creates 80 per cent growth of industrial sector growth) climbing 12.2 per cent on-year. This is the highest 11-month level since 2011.

The World Bank also suggested that pursuing greater macroeconomic resilience and enhanced competitiveness would support long-term growth prospects. It said that as an open economy, Vietnam needs to maintain a responsive monetary policy, exchange rate flexibility, fiscal consolidation, and moderate credit expansion to enhance the macro-policy framework and ­resilience.

Advancing structural reforms, including for state-owned enterprises and the banking sector, along with improving efficiency in public sector investment, would boost productivity and potential output. Policies that facilitate trade would enhance Vietnam’s export competitiveness, especially in the context of the recently-ratified Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the EU-Vietnam Free Trade Agreement.