Vietnam’s economy on track, says government

Over the past three years, the economy’s growth quality has been visibly improving, with governmental analysis, Photo: Le Toan

Deputy Prime Minister Vuong Dinh Hue last week told the National Assembly (NA) that since 2016, the economy has been “positively and clearly changing in terms of growth quality.”

“The most important thing is that the economy has been growing on the right track,” he stressed.

According to the government, the economy has been growing qualitatively and comprehensively in all three key sectors. This year, agro-forestry-fishery is up 3.3 per cent on-year – a four-fold increase against 2016 and hitting a record $41 billion in export turnover. Industry and construction meanwhile is up 7.59 per cent on-year, while services are up 7.35 per cent on-year – the highest such rise since 2008.

Of the industrial sector’s growth, the manufacturing and processing sector is expected to witness an on-year rise to 13.6 per cent this year. Previously the rate climbed from 11.9 per cent in 2016 to 14.5 per cent last year.

“I would like to stress that in the agro-forestry-fishery sector, high growth can be seen comprehensively in cultivation, livestock production, and fishery. Meanwhile in the industrial sector, production is developing strongly with a gradual reduction in mining, especially exploitation and export of crude oil and coal. Also, the manufacturing and processing sector is rapidly expanding,” DPM Hue said. “The service sector, especially tourism, has grown spectacularly.”

DPM Hue further noted that growth has not only relied on investment and exports, but also on the domestic market. Encouragingly over the past three years, total revenue from selling all types of goods has enjoyed an annual rise of over 10 per cent. This year, the revenue ascension in the domestic market is also the same as the expected 11.2 per cent hike in export turnover.

According to the government, labour productivity and total-factor productivity (TFP) have also risen, reflecting an economic growth improvement.

“Vietnam has become a nation with the highest rise in labour productivity in the region, at an average rate of 5.62 per cent within the 2016-2018 period, far outpacing the average rate of 4.3 per cent in the previous five-year period, and also exceeding the target of 5 per cent earlier set for this government term,” DPM Hue said.

Moreover, the TFP ratio in the economy sat at 33.58 per cent in the 2011-2015 period, and increased to 45.47 per cent last year. TFP is a measure of the efficiency of all inputs to a production process. Rises in TFP result usually from technological innovations or improvements.

Also, the economy’s incremental capital output ratio (ICOR), which is the additional capital required to increase one unit of output, has also clearly improved. The ICOR was 6.42 in 2016, 6.11 in 2017 and expected to reach 6.46 this year. It is about 6.32 for the 2016-2018 period.

The confirmation from DPM Hue followed some NA members expressing their concerns over the progress of the country’s economy.

Deputy Huynh Thanh Phuong, representing the southern province of Tay Ninh, said, “The economy’s growth quality remains problematic. For example, it largely relies on investment capital, while labour productivity increases negligibly, and TFP remains low.” He, however, did not provide any figures to protect his view.

Tran Tri Quang, a deputy representing the southern province of Dong Thap, also stated, “The economy’s growth quality has failed to improve remarkably. It still relies on investment capital, natural resources, and manual labour.” Like Phuong, deputy Quang did not cite any figures or examples of his views.

Meanwhile, deputy Tran Hoang Ngan from Ho Chi Minh City saw the economy growing sustainably. “My in-depth research on the

country’s socio-economic situation since 2008 shows that this year we have reaped many good results, quantitatively and qualitatively, as well as sustainably,” he said.

“Quantitatively, the economy grew 6.21 per cent in 2016, 6.81 per cent last year, and 6.98 per cent in the first nine months of this year – the highest nine-month growth over the past 10 years,” he said. “Qualitatively, the average annual rise in labour productivity in the 2016-2018 period is 5.62 per cent, far higher than 4.35 per cent in the 2011 – 2015 period.”