Sketching the economic aspect in 2019

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The internal force of the economy was quite stable after 3 years between 2016-2018 with high growth, the macro-economy was stable and the business environment was improved. Photo: Nguyen Ha

Reasonable growth

At the sixth session of the XIV National Assembly, in addition to the 2018 economic development assessment, the Government has reported to the National Assembly on the socio-economic development plan for 2019. Accordingly, the overall target in 2019 was to continuously consolidate macroeconomic fundamentals, to control inflation, to improve internal capacity and autonomy of the economy. The improvement of the quality of Vietnam's growth in the coming period requires stronger economic and institutional reform, substantial improvement in the business environment, improving labor productivity and innovation to increase the competitiveness and resilience of the economy. The stable economic growth combined with positive changes in cultural and social life and raising people’s incomes were long-term goals for sustainable socio-economic development.

Evaluating the targets of 2019, Dr. Nguyen Duc Do, Deputy Head of the Institute of Economics and Finance (Ministry of Finance), said that the targets set by the Government were feasible. The Consumer Price Index (CPI) of about 4% was an entirely achievable target. However, on GDP growth, Dr. Nguyen Duc Do noted that this growth depended on the fluctuation of the world economy. If the world economy was relatively stable as it had been in 2018, the target of 6.6-6.8% could be achieved, but if the world economy fell, it would be difficult to achieve this result.

Mr. Vu Hong Thanh, Chairman of the National Assembly Economic Committee, said that the average CPI growth rate was about 4%, which was relatively appropriate in the context of rising inflationary pressures, while aiming to maintain macroeconomic stability and stimulate growth. However, attention should be paid to measures to reduce inflation through measures to stabilize prices, stabilize interest rates and adjust public service prices in order to achieve the targets set by the National Assembly in the Resolution No. 142/2016/QH13, which were to strive to control inflation at 3% by 2020.

It is said that the growth rate was reasonable and feasible. Generally assessing the economic development trend in 2019, Mr. Vu Hong Thanh said that positive trend was critical. Vietnam's economy would continue to benefit from the resilience of the world economy. The internal force of the economy was quite stable after 3 years 2016-2018 of high growth, the macroeconomic was stability and the business environment was improved. This was a good time for us to continue to take advantage of resources, attract investment, promote exports, maintain reasonable growth and complete the 2019 economic development plan and the five-year plan of 2016-2020 as well.

Many commentators also said that the 2019 economic would have positive dynamics, because Vietnam has signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), completed the legal review of the EU-Vietnam Free Trade Agreement (EVFTA), and implemented the WTO Trade Facilitation Agreement. Together with 10 other free trade agreements that Vietnam has signed and are currently undergoing, these will be important doors that enable us to stably and favorably reach important markets in the world as well as attract foreign direct investment (FDI).

Still wondering about inflation

Despite positive comments on the economic picture of 2019, there are many concerns for the targets of economic growth due to difficulties and unpredictable evolution of the world economy.

Vision to 2020, Dr. Vu Tien Loc, Chairman and President of Vietnam Chamber of Commerce and Industry (VCCI), said that although the 2016-2015 period saw positive economic growth, with an average annual growth rate of 6.57%, achieving an average growth rate of 6.5% to 7% for the 2016-2020 period was still a huge challenge in the context of the unfavorable world economy, which may be impacted on the export growth and foreign investment flows into Vietnam, while both export and FDI were the main drivers of the growth. Therefore, according to Mr. Vu Tien Loc, the determination of other targets, including budget revenues, expenditures, and public debt should be careful and should not rely on the GDP growth plan, which is higher than 6.5%.

About the picture of inflation and price, with the fact that the government set the inflation target of about 4% instead of less than 4% in 2019, and move from fixed target less than 4% to a soft target of about 4%, according to the representative of VCCI, is a step backward in policy making and unpredictable consequences. "When the government is not bound by a fixed inflation control target, the drastic implementation will be much less. Ministries, branches will no longer have to consider when proposing suggestions related to price increases, dumping, price adjustment or new taxation.” From another angle, Mr. Le Dinh An said that controlling inflation under 4% would still be possible, but imperceptibly, we would stop the market economy. According to Mr. An, in order to benefit the economy, inflation should not be controlled at 4% but should be considered at 4-4.5%, so commodities can be regulated by the market economy, for example gasoline, school fees, medical services... "With the current economic situation in Vietnam, inflation below 5% is not a problem, it is not unstable and the inflation rate below 5% does not upset the major balances of the economy. In fact, the evolution of the economy has changed a lot, so there is no need to have fixed indicators for this issue. The set goals can still be adjusted. Under conditions that we are still trying to control inflation, creating a large compression, it may have a negative impact on the economy. The economy will not catch up with the market mechanism, while we have been building a full market mechanism gradually approaching the world economy," said Mr. Le Dinh An.

In the context of not only many opportunities but also many risks, experts stressed that the key tasks of the 2019 economy were to stabilize the macro economy, to implement drastically solutions to speed up the restructuring of the economy, to further reform the growth model and to further improve the quality of growth. The competitiveness, business investment environment of the economy need to be strongly improved, bringing the Vietnamese economy to continue its growth momentum, in which, enterprises must feel real positive signals from the business environment through the changing efforts of the entire political system, not only the tireless efforts of the head of government.