Economic growth to face difficulties in 2017

	2017 to be good year for Vietnam economy: analysts
	Prime Minister sets targets of 4% GDP in 2017.
	Exports prospects in 2017 are promising

The growth rate of 6.7% may be attained if 2017 exports are higher than 2016. Photo: ST.

Unexpected development

At the second working session of the National Aseembly XIV, the National Assembly agreed on the general target of economic development in 2017 to ensure macro economic stablization, changing significantly implementation of three cutting points of strategy, including restructuring the economy in line with the growth model, raising the productivity, quality, efficiency and competitiveness; encouraging start-up projects, developing enterprises, speeding enterprises’ growth and enhancing the economy’s control. Concretely, the gross domestic product (GDP) would increase by 6.7%; the speed of consumption price index would rise by 4% in average; export turnover is expected to increase by 6-7%; the rate of import in excess compared to the total export turnover would climb by 3.5%. The proportion of surplus expenditure of the State budget would be less than 3.5% in comparison with the GDP. The entire capital for social development investment would reach about 31.5% of GDP. GDP growth of 6.7% may sound familiar, because it was the target of 2016 which Vietnam is unlikely to achieve.

According to experts, 6.7% as the GDP growth target of 2017 is so difficult to reach, especially in the context of more and more complicated developments of the world’s economy. The growth may be higher than in 2016 but the recovery would be slow and face risks, particularly when the prices of several fundamental commodities and crude oil are still low.

Regarding the domestic situation, in addition to advantages, we still cope with various difficulties and shortcomings. Our productivity, quality, efficiency and competitiveness are poor, while the world is entering the fourth industry revolution. Implementation of the Agenda 2030 of the UN in terms of sustainable development and international integration commitments, especially the new generation FTAs have created both advantages and disadvantages. The need of strengthening national defense, security, defending national sovereignty and responding to climate change are rising, whereas resources are still limited.

Economic expert, Vo Tri Thanh, supposed that there were two important targets: the growth target of 6.7% and the inflation target of 5%. Most recent forecasts by international and national research organizations have showed two scenarios: first, Vietnam may reach the inflation target of 4-5% despite the fact that the target is hard to attain, and second, Vietnam will be unable to achieve the target. Most forecasts supposed Vietnam’s growth would be between 6% and 6.5%, particularly in the range of 6.2 – 6.4%. This proves that the target of 6.7% may be impossible.

According to Dr. Dang Duc Anh, Director of the Forecast and Analysis Board under the Center of National Economic and Social Forecast, the level of the GDP loss caused by climate changes was 0.4% in the period of 2011 – 2015. He stressed that Vietnam also suffered losses from the climate change in 2016. Thus, the economic growth was adversely impacted. Indirectly, climate change and environmental pollution do not only influence agriculture but also jobs, household incomes and enterprises, leading negative impacts on the State Budget and investment. Mr. Dang Duc Anh anticipated the scenario of low growth of 6.44% and the scenario of high growth of 6.72% in 2017. Findings from emulation impacts of climate change and environmental pollution on certain economic targets in 2017 showed that climate change would reduce the GDP by 0.59%, private consumption growth by 0.1%, total investment growth by 1.12% and employment growth by 0.07%. Hence, if we do not address this matter, Vietnam’s economy will obviously face difficulties.

Feasibility if efforts are made?

From a positive aspect, some experts supposed Vietnam’s economy was sometimes stable with inflation of less than 5%. Although the target of 6.7% is hard to reach, the growth rate will attain the figure of 6% as a minimum. The more important thing is that we are able to control most of the markets such as gold, real estate, and the securities markets, and the banking system. With these achievements, 2017 may be the year exceeding the achievements of 2016.

Nguyen Tri Hieu, economic specialist shared that if we do not have the TPP agreement, we should take advantages of the other 18 FTAs. Besides, in line with improving the investment environment, the private sector is now playing an important role and generating a driving force for economic development. So, it is necessary to build trust to attract resources from this sector. “In addition, we should introduce measures such as increasing the credit scores of Vietnam to attract investment from the FDI sector. In parallel, the center point of restructuring consists of 3 pillars: public investment, State owned enterprises, and the banking system in 2017 for strengthening Vietnam’s economic power. If we accomplish such work, the target of 6.7% will become possible” said Mr. Nguyen Tri Hieu.

Looking into the driving force for economic growth, this specialist noted that Vietnam’s economy would be easily affected if exports did not grow smoothly. In 2016, exports have slowly increased in comparison with 2015. If the trend of domestic market protection rises in various countries, the markets receiving Vietnam’s exports will be narrowed, having direct impacts on the economy and the growth rate. Therefore, the rate of 6.7% may be reached if exports in 2017 are higher than in 2016. If the situation of 2016 repeats in 2017, the target of 6.7% will be difficult to attain for Vietnam’s economy, which mainly depends on exports. In 2016, Vietnam set above 10% as the target of the export growth. However, at this moment, export growth has only reached 7.5%. Thus, exports should be accelerated for GDP growth.

With regard to the growth rate of 6.7%, Dr. Nguyen Duc Kien, Deputy Head of the National Assembly’s Economic Committee said that we set the above target because numerous potentialities could be seen. If we addressed successfully the difficulties, the growth rate may be raised. He also supposed that we could settle obstacles and raise the living standards of the people, if Vietnam’s economic growth is always above 6%. The higher the economic growth, the better the economic recovery in line with better lives for employees.

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However, he noted that we should study the nature of the matter. For example, we announced that we had capitalized 558 enterprises but various economic sectors did not get involved in the process as expected and the nature of the target. Dr. Nguyen Duc Kien shared that we should not focus on the figures but on the efficiency of growth.