Vietnam’s economic growth: Optimistic or pessimistic?

By Duc Anh - Jul 14, 2019 | 12:07 PM GMT+7

TheLEADERWhile domestic think tanks in Vietnam show optimism on the local economic growth and forecast a better performance than the government’s target, international organisations are more cautious with lower projections.

Vietnam’s economic growth: Optimistic or pessimistic?
Vietnam economic growth in 2019 will vary depending on numerous scenarios. Photo: Reuters

Vietnam Institute for Economic and Policy Research (VEPR) has forecasted Vietnam’s economy to achieve a growth of between 6.6 to 6.8 per cent this year, a better performance after the nation has attained a 6.71 per-cent growth in the prior quarter.

The growth, accordingly, would accelerate in the third and fourth quarter to reach 7.06 per cent and 7.17 per cent, respectively, prompting the growth of the entire year to settle at 6.69 per cent.

The average inflation in the first and second quarter, meanwhile, sat at 3.38 per cent and 4.21 per cent, respectively, according to VEPR.

The future of Vietnam’s economy in 2019 would likely become more uncertain due to external shocks, including the US-China trade war and Japan-South Korea tensions which by have severely affect the global supply chains and economic links.

VEPR thus suggested the State Bank to monitor the foreign exchange rate in a flexible manner that respects market rules in a bid to absorb the external shocks.

The National Centre for Socio-economic Information and Forecast (NCIF), likewise, has recently predicted that the economic growth will extent to 6.86 per cent to exceed the government’s target.

According to NCIF director Tran Thi Hong Minh, certain factors posing positive and negative impacts on Vietnam will include the devaluation of the Chinese yuan, the US-China trade war and also the tension between the US and Iran on Iran’s oil exports.

The improved investment environment together with deeper international integration, meanwhile, will act as the leverage to fuel the country’s growth in the last months of the year.

International organisations, however, are not so optimistic as their local colleagues on the forecast of Vietnam’s GDP growth this year.

In Asian Development Outlook (ADO) 2019, Asian Development Bank (ADB) forecasts Vietnam’s economy to grow by 6.8 per cent in 2019 and 6.7 per cent in 2020.

Inflation is expected to average 3.5 per cent in 2019 and 3.8 per cent in the following year.

The report underlines the importance for Vietnam to strengthen private firms’ integration in the global value chains, which is a key policy challenge for Vietnam’s long-term growth.

Improving small- and medium-sized enterprises’ access to finance and enhancing their capability, including workers’ skills, are among important measures to enable them to better adopt new technologies and have more value added in the global value chains.

World Bank said that the country’s GDP growth for the whole year is forecast to decelerate to 6.6 per cent, driven by a weaker external demand and continued tightening of credit and fiscal policies.

The figure will slightly decrease to 6.5 per cent in the next two years.