November 14, 2019 13:14

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GDP in the first quarter: Which factors produce good results?

12:24 | 05/04/2019

VCN- After all the worries for economic growth in the first quarter of 2019, statistics released last week indicate that the economy shows positive signs. Although the growth rate decreased compared to 2018, the first quarter growth was higher than previously expected by of the Ministry of Planning and Investment. More importantly, inflation is kept at a stable level.

gdp in the first quarter which factors produce good results Vietnam’s fiscal deficit likely to remain wide during 2019
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gdp in the first quarter which factors produce good results
Wholesale and retail are the sectors with the highest contribution to overall growth with 0.95 percentage points. Photo: Internet

Many "expectations" decelerate...

The Ministry of Planning and Investment, at the end of 2018, proposed the socio-economic development plan for 2019 with an economic growth of about 6.6-6.8%, of which growth in the first quarter of 2019 will be around 6.76 % However, based on the data of the first 2 months of 2019, the Ministry of Planning and Investment in March 2019 adjusted the forecast of lower growth forecasting the first quarter of 2019 growth rate to be 6.58%. According to the General Statistics Office, many economic sectors have lower growth rates than last year.

In the first quarter of 2019, the agricultural sector increased by only 1.84%, much lower than the 3.97% increase for the first quarter of 2018.The first quarter of 2019 is the time when agricultural production is facing difficulties, especially in the livestock sector when facing African swine flu. The pig industry accounts for 53% of the value of the livestock industry, with authorities having to destroy 82,200 pigs across the country after the spread of African swine flu causingfarmers to reduce their herd and stop breeding. This has impacted a 0.02 percentage point reduction in GDP. The mining industry in the first quarter of this year fell 2.2%, reducing 0.15 percentage points off the total added value of the whole economy along with reduced crude oil production, down 10.3% and natural gas down 2.4%.

Economic expert Dinh Tuan Minh explained thatone reason the GDP in the beginning of 2019 was lower than the same period in 2018 stems from the reason that in 2018, the economy recorded large FDI enterprises like Samsung and Formosa started operating a number of production complexes which helped to increase GDP in the first quarter. As these complexes go into stable production the increase is no longer available, so there is no mutation factor for higher growth.

This is also mentioned by Mr. Pham Dinh Thuy - Director of Department of Industrial Statistics, General Statistics Office when analyzing GDP growth in the first quarter of this year compared to 2018. According to Mr. Thuy, processing industry manufacturing variables were the main driving force for economic growth, but in the first quarter of 2019, the industry saw a lower growth rate lower than 2018 due to the impact of the high-density industry for producing electric products; computers, optics decreasing. This industry has increased by 2.9% but the same period last year increased by 3.4%. Data from the General Statistics Office also showed that in the first three months of the year, the highest value export of Vietnam is telephones and electronic components which only reached 12.1 billion USD, down 4.3% compared with the same period last year.

"Lifesaving" comes from many other areas

Despite the fact that there were many economic sectors decelerating, economic growth in the first quarter was higher than expected. According to the General Statistics Office, GDP in the first quarter of 2019 achieved a growth rate of 6.79% compared to the same period in 2018. Although the growth rate decreased compared to 2018 (Q1 / 2018 GDP increased by 7.45%), the increase of 6.79% in the first quarter is the second highest increase since 2009.

According to Mr. Nguyen Bich Lam, General Director of General Statistics Office, the overall picture shows the first quarter GDP growth figure to be quite impressive. In the context of a declining world economy and global commodity trade, the picture of Vietnam's economy and society in the first quarter of 2019 continued to have positive changes. So what are the economic growth factors?

Mr. Nguyen Bich Lam said that the GDP of the first quarter is still positive because some bright points are still maintained. The service sector achieved the same growth rate as the previous year,wholesale and retail increased by 7.82% compared to the same period last year, which had the highest contribution to the overall growth rate with 0.95 percentage points, accommodation and catering services increased by 6.22%, contributing 0.3 percentage points.

In the first quarter, there were more than 28,000 enterprises newly registered with a total registered capital of 375.5 trillion VND, up 6.2% on number of enterprises and 34.8% in registered capital compared to the same period in 2018. Also in the first 3 months of the year, attracting foreign investment reached a record with nearly 10.8 billion USD, up 86.2% compared to the same period in 2018. Disbursing the first capital FDI also achieved impressive results with more than 4 billion USD going into the economy, 6% higher than 2018. The trade balance of goods also maintained a trade surplus.

According to Pham Dinh Thuy, Director of Industrial Statistics Department, General Statistics Office, industry is a bright spot for growth and contributes positively to the economy. “In particular, the main growth driver of the economy in the first quarter of 2019 is the processing and manufacturing industry with an increase of 12.35%, though lower than the increase of 14.3% in the first quarter of 2018 it is higher than the increases in the first quarters of 2012-2017. This contributes significantly to the increase in total value added with 2.72 percentage points,” he said. Mr. Thuy also emphasized, though lower than 2018, the manufacturing and processing industry growth rates being indoublefigures is also a miracle.

Commenting on the impact of the first quarter GDP growth on future GDP growth, Mr. Nguyen Bich Lam said that GDP in the first quarter of 2019 achieved good growth with a stable macro economy and low inflation control. In the last 3 years, the economic investment environment has been improved, the newly established enterprises have increased to the highest level in the last 5 years, the unemployment rate and underemployment tend to decrease, and the production capacity of the economic expansion, all of these factors will create momentum for the economy to develop in the future.

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From another perspective, many predict that economic growth from now to the end of the year will face many obstacles. According to Dinh Tuan Minh, the same growth engine as Samsung or Formosa or "big" projects are not yet available, so the economy is depending on two main factors: the demand for foreign consumption (ie export) and increased domestic consumption. However, the world economic outlook is tending to slow down, which means that Vietnam's exports will struggle to expect good growth compared to 2017-2018.For domestic consumption demand, there is limited space to increase consumption. Therefore, this expert said that it is difficult to expect higher growth than the predicted 6.4-6.5%.

Economic expert Dinh Tuan Minh:

In order to achieve high growth, growth must create an artificial mutation factor to stimulate demand through investment and government credit stimulus packages, this is facing inflation. Butif there isno such artificial stimulus, it is imperative to persistently follow the supply-side path, focusing on improving the business environment, improving the SOE sector, accelerating equitization and attracting investment. For example, SOEs should find ways to attract FDI, through which the State can withdraw that capital to invest in infrastructure to boost growth. If persevered with it could push a slightly higher growth rate than current growth potential of 6.4-6.5% to 6.6-6.7%.

By Hoai Anh/ Bui Diep