April 07, 2020 11:22

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Economic growth prospects in the second half of 2019

19:38 | 19/07/2019

VCN - Economic growth in the first six months of 2019 was relatively stable, so the Vietnamese economy continues to be an attractive destination of capital, technology and international economic resources. According to experts, this will continue in the last two quarters of 2019 and the forecast of the ability to achieve the growth target is very positive.

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Export-oriented processing and manufacturing industry remains the main driver for economic growth in 2019. Photo: ST

Many organizations positive about GDP in 2019

The Government determined 2019 to be a "breakthrough" year, striving to successfully implement the 5-year socio-economic development plan for 2016-2020. Therefore, from the beginning of the year, ministries, branches and localities have focused on building and implementing tasks to fulfill the socio-economic development objectives and targets. The overall growth rate in the first half of the year reached 6.76% as a result of the Government's efforts to manage the entire economy.

Regarding the economic forecast for Vietnam in the last months of 2019, experts from the National Center for Economic and Forecasting (NCIF) said that Vietnam's economy still achieves positive results when the targets of the development plan of some key macroeconomic indicators of the National Assembly and the Government's target of achieving is able to fulfill and exceed the set targets of 2019. In the remaining months of 2019, the economy of Vietnam continues to be influenced by both advantages and disadvantages from the international economy and factors from the internal economy itself.

On the positive side, Vietnam's economy is supported by strong domestic demand thanks to increased capital inflows from tourism, remittances and FDI. The middle class and accelerated urbanization have been boosted, and growth is likely to be sustained with the support of the processing industry and manufacturing export and mechanisms to promote social resources into production and business. The processing and manufacturing industry is expected to see a positive growth rate through policies to boost production from the Government.

Growth motivation is expected to increase as attracting FDI benefits when there are many positive factors in 2019. The development of investment capital has achieved favorable results when the Government continues to accelerate construction progress and disburses construction investment capital. Import and export also received many advantages from the efforts to strongly improve the domestic investment and business environment, and the consumption trend continues to grow steadily in the last months of the year.

Dr. Dang Duc Anh, deputy director of NCIF, said that economic growth in 2019 is forecast at 6.86%, exceeding the target of 6.6-6.8% of the National Assembly and the target of the Government. Indicators of inflation, the proportion of social development investment capital in comparison with GDP, the growth rate of total import-export turnover and the trade deficit rate against total export turnover continue to be strictly controlled. This is a great effort of the Government in the volatile context of the world and regional economies.

Forecasting economic growth in 2019, Mr. Nguyen Anh Duong, Head of Macroeconomic Department, Central Institute for Economic Management (CIEM), said that economic growth in 2019 could reach the level of 6.82%. In particular, the yearly export growth is forecast at 8.02%, the trade surplus is forecast at 0.8 billion USD, and the average inflation in 2019 is 3.38%.

According to Assoc. Prof. Dr. Nguyen Duc Thanh, Institute of Economic and Policy Research (VEPR), with a growth rate of 6.71% in the second quarter of 2019, the target of growth of 6.6 - 6.8% of 2019 proposed by the National Assembly is achievable. VEPR expects economic growth in 2019 to be very positive, at 6.96%, higher than the forecast of both NCIF and CIEM.

Great challenges

Despite positive comments on GDP growth from now until the end of the year, Assoc. Prof. Dr. Nguyen Duc Thanh mentioned challenges from conflicts in the trade relations of big countries that may affect Vietnam in the second half of 2019.

According to Associate Prof. Dr. Nguyen Duc Thanh, before the US-China trade war, Japanese-Korean tensions affected global supply chains and new economic links. The future of Vietnam's economy in 2019 becomes more uncertain due to the impact of world market shocks. Accordingly, the fact that Vietnam is on the list of accusations of monetary manipulation of the US in May shows that the State Bank needs to administer the exchange rate flexibly and objectively and respect the market rules to survive external shocks.

Lowering the value of VND to increase trade will be a poor decision at this time.

The average inflation rate in the second quarter is at a moderate level (2.65%), however, there was a recent increase. The impact of the increase in electricity and gasoline prices from the first quarter to CPI may last 2-6 months.

“Inflation in the first six months was controlled at a low level, but there are many potential risks in the future. The main cause of the increase in the price of educational items, food and foodstuff prices was unstable fluctuations of African swine flu and fuel prices,” said Nguyen Duc Thanh.

Experts from NCIF said that in the remaining months of 2019, the economy still faces many challenges. Accordingly, a number of industries that are growth drivers for the economy such as telephones and electronics may not maintain impressive growth rates as in the previous period, accompanied by deceleration according to the roadmap of the mining industry.

Specifically, the growth motivation from Samsung is not unknown before concerns about the reduction of production scale of this enterprise over the same period. In fact, Samsung's decline in business started from the end of 2017 and throughout 2018. The competitive challenge that Samsung faces in the global market can cause enterprises to decline their growth. Although the processing industry is still in the trend to continue to improve, the level will slow down over the same period.

Agricultural exports are expected to face many challenges, which makes it difficult for the agriculture, forestry and fishery sectors to achieve high growth rates like the same period last year. One of the reasons is that Vietnam's agricultural products have to compete fiercely in exporting, causing prices to fall, while large agricultural importers of Vietnam such as the US, EU, China, Japan and Korea are all increasing the protection of agricultural products through quality management and food safety standards, requiring traceability. Not to mention, the disbursement of public investment capital, equitizing SOEs and divesting in many ministries and localities took place slowly.

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Dr. Nguyen Dinh Cung, Director of CIEM said that in this context, the issue of reform must continue to be a priority.

“I look forward to more in domestic reforms, that's our own way to promote growth fundamentally. Without reforms, all the negotiations of agreements are only for foreigners, Vietnamese enterprises will not benefit," said Dr. Nguyen. Nguyen Dinh Cung.

Dr. Nguyen Dinh Cung, Director of the Central Institute for Economic Management:

"FTAs can help Vietnam integrate deeply, but there are many obstacles Vietnamese enterprises have not escaped from yet, so they cannot reach the target. It is our technical barrier that prevents enterprises from developing; the technical barrier is to allow government officials to intervene in business activities of enterprises for self-interest. Private enterprises must be the main driving force for growth. As long as that is achieved, Vietnam's economy will grow sustainably, creating benefits for many people. Regarding current growth, it is difficult to develop.

By Hoài Anh/Bui Diep