Three scenarios for Vietnam's economic growth in 2018

By Trung Ngoc - Sep 15, 2017 | 07:08 AM GMT+7

TheLEADERThe economic growth target of 6.7 per cent in 2017 is mainly dependent on the recovery of the agricultural and manufacturing sectors.

Three scenarios for Vietnam's economic growth in 2018
The agricultural sector has a significant effect on the economic growth target in 2017. Photo: Finance

According to a report conducted by from the National Center for Socio-Economic Information and Forecast (NCIF), Vietnam's economy in 2017 is generally stable and inflation remains low. However, to achieve the economic growth target of 6.7 per cent, the growth rates in the quarter III and IV have to reach approximately 7.4 and 7.5 per cent, respectively.

In addition, in view of the current situation, the manufacturing sector is not solidly recovered. Apart from impressive growth in the service sector, the growth of two sectors (agriculture and industry, construction) still remains stable.

Despite strong FDI growth, disbursement from the state budget still faces many difficulties. There is a significant increase in export, which is mainly from the FDI sector. Trade deficit tends to increase again.

The Government’s report on the socio-economic situation in the first 8 months of and in 2017 also stated that "The task of ensuring the GDP growth target in 2017 remains a big challenge and faces many difficulties. This requires industries and departments to drastically implement the solutions set out in Resolution No. 01/NQ-CP, the specialized resolutions, the monthly meeting resolution of the Government, the Prime Minister's Directive No.24/CT-TTg.”

In 2018, the world’s economic situation in countries and regions will not be much volatile. The world’s GDP growth is expected at 3.6 per cent (IMF, June 2017). The world’s prices and trade are forecast to remain stable. In Viet Nam, the process of institutional reform and improvement of the investment environment have been drastically implemented.

NCIF forecasted that Vietnam economy in 2018 can take place under the following three scenarios:

The medium scenario, which is also the basic one, is most likely to take place, assuming that the world’s economic growth will continue stable at 3.6 per cent. Investment in the state sector will be improved and play a regulatory role in the economy. Administrative procedures and investment environment will continue to be improved. Social investment capital will increase to 7 per cent. The economic model will be partially transformed in depth, but fundamentally, it is still an economy with capital-led growth economy and trade deficit. The financial system is quite stable. The financial and monetary management is relatively flexible. Since then, economic growth in 2018 might reach 6.5 per cent while inflation will remain low at 4 per cent.

The high scenario is less likely to take place but it might if the economy reached expectations set out in the medium scenario. In addition, the government's efforts in economic reform and management would remove the bottlenecks in the economy, facilitating the development of the business community. Since then, the economic growth would be not only higher but also more stable, creating the premise for the remaining years of the five-year period (2016-2020).

The low scenario is least likely to take place but it might if Vietnam’s economy faced difficulties and disadvantages. The measures, which stimulated economic growth in 2017, posed no effectiveness immediately but cause inflation pressures and macro instability. Since then, if the negative impacts from the world’s economy were added, Viet Nam’s economic growth would be at 6.3 per cent, lower than that in 2017 while inflation might rise again at 4.5 per cent and even higher.