Vietnam economy in 2019: Confident of meeting the targets

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Macroeconomic stability and business confidence also increased. In the first nine months of 2019, the industry sector grew by 9.56%, a very high level among the top developed countries. Photo: H. Diu.

Good results

In the resolution of the 2019 socio-economic development plan, the National Assembly sets out 12 major targets in socio-economic development: GDP increases by 6.6-6.8%; CPI increases by 4%; total export turnover increased by 7-8%; total development investment capital of the whole society increases by 33-34% of GDP. After 9 months, domestic and international experts have said that Vietnam can achieve the targets, even beating some of them.

The General Statistics Office's third-quarter and nine-month statistics of 2019 showed that, in the first nine months of the year, GDP was estimated to increase by 6.98% compared to the same period last year – the highest increase in the same period in the last 9 years.

GDP in the third quarter increased to 7.31% compared to the same period last year, higher than the increase of 6.82% in the first quarter and 6.73% in the second quarter of this year. This is due to the efforts and timely guidance of the Government, ministries, branches and localities to implement the objectives, tasks and solutions set by the Party, the National Assembly and the Government. In addition, the harmonization of economic sectors, the increase in confidence of enterprises and investors in the business environment also contributed to the stability of the macro economy.

According to Pham Dinh Thuy, Director of the Department of Industrial Statistics (General Statistics Office), in the first nine months of 2019, the industry sector grew by 9.56%, a very high level among top developed countries. In particular, the manufacturing and processing industry continued to be a highlight of the whole industry with an increase of 11.37%, playing a key role in leading the overall growth of the industry and the economy. Although the inventory rate in 9 months increased over the same period – up to 72.1% – according to Mr. Thuy, this is a technical and strategic inventory due to focusing on 3 main industries: petroleum; production of automobiles and motorbikes; and metal production. The inventory of these sectors is to wait for positive signals from the market to bring products into consumption.

In addition to the main drivers, experts expect a lot of new incentives that will help promote a stronger economy, such as the Law on Public Investment (amended), effective January 1, 2020. The National Assembly will consider and approve the Law on Investment in the form of public - private partnership. This is expected to remove a series of barriers and obstacles to strongly attract domestic and foreign private investment into socio-economic infrastructure.

Thanks to these strong developments, international organizations have appreciated the possibility of 6.6-6.8% growth as set by the National Assembly in 2019. In particular, the Asian Development Bank (ADB) predicts that Vietnam will maintain strong growth in 2019 and 2020 at 6.8% and 6.7%, respectively. Standard Chartered Bank forecasts that Vietnam will be ASEAN's fastest growing economy this year with an expected growth rate of 6.9%, which is expected to be maintained until 2021. In particular, this result of Vietnam is "better" in the context of the global economy showing signs of decline, export growth of many countries slowed down due to the impact of trade conflicts and geopolitical tensions, of which the strongest impact is the US-China trade war.

Removing "bottlenecks"

Despite many positive results, the Prime Minister reminded leaders of ministries, branches and localities not to be subjective, and focus on drastically and synchronously implementing the assigned tasks and solutions. Besides, in recent years, the head of the Government has taken a very strong step in removing "bottlenecks" in macroeconomic development.

Accordingly, the biggest "bottleneck" of the economy is the disbursement of public investment, negatively affecting the overall development of the economy.

According to a report by the Ministry of Planning and Investment, in 2019, the National Assembly allocated VND429,300 billion of public investment. The capital assigned to the detailed plan has reached more than VND367,000 billion, equaling 85.5% of the estimate assigned by the National Assembly. However, it is estimated that by the end of September, the newly disbursed capital will reach over VND192,130 billion, accounting for 45% of the plan assigned by the National Assembly, of which the lowest is disbursement of Government bonds and ODA.

Meanwhile, according to calculations, public investment accounted for nearly 11% of total GDP and about 32% of the total social investment in 2019, so slow disbursement is seriously affecting overall growth, pulling back other capital flows of the economy.

At the same time, in Vietnam's import and export activities, there is problem in the price of goods, as the number of exports does not decrease, the price of goods has fallen, causing the reduction of the value of contribution to the economy. For example, in the past 9 months, the agricultural sector only contributed 4.8% to the economy, reaching a growth rate of only 2.02%, the lowest level in many years, except 2016.

According to the General Statistics Office, this is due to the weather, natural disasters and epidemics, resulting in low output. However, the most worrying thing is that the price of agricultural and aquatic products has dropped sharply, such as cashew nut prices down by 21.8% and pepper prices down by 22%. In addition, export activities still face obstacles from the trade protection of traditional markets, so it can be seen that Vietnam's trade surplus in 9 months was a great effort.

Regarding inflation, although the ability to meet the targets of the National Assembly is still very high, it does not mean that concerns over inflation have decreased. In recently, many commodity prices have increased in line with the fluctuations of the world market. In particular, in September, gold price increased by 3.25% compared to the previous month and increased by 18.05% compared to December 2018. Many essential consumer goods also increased sharply. However, thanks to flexible monetary policy management, Vietnam has a stable foreign exchange market, petrol and gas prices also dropped. Nguyen Minh Cuong, ADB's chief economist in Vietnam forecasts the country’s inflation will still decrease, but monetary and credit policies must be vigilant and closely monitor world economic developments.

Experts warn of challenges to Vietnam economy despite good prospects

In general, in the current context, the above achievements of the Vietnamese economy are praiseworthy and this is the basis for us to achieve the goals of 2019, as well as for economic development in the 2016-2020 period. However, we must find solutions to remove obstacles and create more suitable mechanisms for Vietnam to develop and grow.