Quality of growth has improved

Photo: S.T

What do you think about Vietnam’s growth prospects in early 2018?

Vietnam's growth in 2017 and the first few months of 2018 has been positive, but there are still shortcomings that we have to overcome. The concern of experts, the National Assembly members and the people today is the quality of growth, meaning that in essence growth must be sustainable, and not dependent on anyone… But the quality of growth must be evaluated on a scientific basis, based on specific indicators, such as total factor productivity (TFP), incremental capital output ratio (ICOR)… By such ways, we are able to compare with other countries in the world.

In qualitative terms, it can be said, compared with other countries in the region and countries in the world, we are still in the middle group rather than a country with high growth rate. In the long list of countries ranked, Vietnam is in the middle. On the one hand, we have to look up to make more efforts, on the other hand we can look down to see that compared to the countries behind us, we have improved a lot. This is an encouraging thing, not just a look at the negative side and then no motivation for the next.

About the point of view that the Vietnamese economy is dependent on the FDI sector, I think that this is an important economic component, an objective, inevitable factor, an indispensable part of us when integrating. With big companies, when they come to Vietnam, they can immediately start producing. We need such strategic partners. When investing in Vietnam, their goal is to make profits. What we care about is that our enterprises are not as strong as they are. Currently, the legal basis to support the development of Vietnam has been developed, but how to implement is what should be evaluated.

So, what are the key factors that can help boost the economic growth in 2018, sir?

In 2018, the economic growth recorded an impressive improvement, the world economic situation continues to recover and is expected to a get high growth rate, but the international situation is expected to be unpredictable, containing many risks and complexities. The remaining quarters of 2018 will be compared with the very high rate in 2017, thus, the results will be lower. In order to maintain as the previous years, the year of 2018 must have key factors. The first quarter of 2018 continued a high growth rate thanks to the momentum of the fourth quarter of 2017 and comparing to a low rate of the first quarter of 2017, the growth rate of the fourth quarter of 2018 is really impressive. This is a good number. However, we must pay attention on the factors.

Firstly, it is psychological as the high growth rate can lead to be subjective and sag, even the International Monetary Fund (IMF) warns of subjective psychology. Secondly, the growth rate in 2017 had a breakthrough, but 2018 has not seen this factor yet. Samsung and Formusa are the two factors that made the high growth rate in 2017. Entering 2018, though Formusa has announced its plans to launch the No. 2 blast furnace and Samsung also shared about its growth rate, it is known that the growth will not have a breakthrough as in 2017.

We have reviewed and assessed the dynamics of growth in 2018, but so far, we have had forecast but the signal is unclear. In reviewing, there is no chance for a breakthrough in the economic growth as in 2017. And compared with 2017, the growth rate of the last quarter of the year may be down. However, I would like to emphasize that this is objective rather than showing the internal forces are weaker. As a policy-making body, the Ministry of Planning and Investment (MPI) has reported to the Government and the Government requested ministries and localities to review large projects in progress. This is about to be completed, it must be accelerated, put into production to create more incentive for the economy.

Photo: ST

Could your share more clearly about the quality of growth?

I think that it is unfair to assess that the current quality of growth is low. In fact, the quality of growth has been improved. This is shown through 4 aspects. Firstly, it is GDP. The improved quality of growth is reflected in the high growth rate. Since 2011, the average growth rate is over 6%, this is a relatively high growth rate for a developing country. In order to narrow the gap, it must reach the rate of 8%, but with a stable macroeconomy, the growth rate of 6% is quite high.

Secondly, the TFP is improved, now it is at over 40%. Of course, with the requirements of Vietnam’s economy, the TFP must increase higher, must be invested more, such as investment into education, technology… Thirdly, labor productivity has improvements, though it hasn’t been meeting demand. Fourthly, the quality of growth must tie with social justice and social development. Accordingly, the average income has been improved, now it is at $US 2,358/person, nearly 2 times higher compared to 2010 and 3 times higher compared to 2007. However, compared to the demands of the economy, the contribution of TFP must be higher, the gaps in average income are still far from other countries… In particular, over the past few years, stable economic fundamentals and social security have been ensured... the HDI (human development index) of Vietnam in 2017 is assessed as quite good by the international organizations, above the Philippines for the first time.

Do you think that the targets of economic growth in 2018 can be achieved and what are the issues that we need to pay attention to in the economic growth in 2018?

2018 is forecasted to have many advantages and difficulties, but the outlook is more favorable. This is a good thing. Specifically, organizations such as the IMF, WB... have good forecasts on the global economy and Vietnam’s economy. The ADB also forecasts that Vietnam's GDP will be higher than that of the government’s forecast, while there was a lower forecast in the previous years. So, looking at such prospects gives us more confidence, but must be very conscious of the difficulties ahead.

For example, the risk of inflationary pressures is present. Inflation in 2018 is forecasted to be under much pressure due to complicated movements of world oil prices as oil prices are climbing with many different forecasts, with forecasts of up to $US 70/ barrel. It is unclear how much oil prices will rise, but the increase in oil prices will lead to a rise in prices of many basic commodities, first of all the increase in domestic petroleum prices. In addition, the inflation challenge comes from price-fixing policies such as increasing wages, adjusting prices for health services, education...

High inflation will affect the foundation that is in urgent need of macroeconomic stability. In addition, there are many challenges such as challenges of trade, stock market... Vietnam’s economy exchanges openly, thus, Vietnam’s stock market is being impacted by the world stock market. Each impact from the world market will immediately affect the stock market in the country...

However, in addition to the challenges, with the motivation from the stable macroeconomic fundamentals, strong reforms in mechanism and policy related to institutional reform, improvement of investment and businesses environment, administrative reforms, business costs reduction, etc., which are strongly directed by the Government, these will continue to promote efficiency and better support the operation of domestic enterprises, promote private sector development and help achieve the growth target set.

Thank you, sir!