Experts warn Vietnam's economy shows signs of losing momentum

Created 13 August 2018
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The Vietnamese economy enjoyed a high growth in the first half of 2018, however, there are indications that it is losing momentum in the remaining months of the year, experts warned.
Manufacturing growth slowed from 15.7 percent in Q1 to 10.1 percent in Q2 2018
Manufacturing growth slowed from 15.7 percent in Q1 to 10.1 percent in Q2 2018
Reports from the General Statistics Office showed that the country’s GDP expanded strongly by 7.38 percent in the first quarter (Q1), the best first-quarter performance in the last decade.
However, the rising rate then slowed down to 6.79 percent in the second quarter and it was predicted that a further weakening trend will continue in the remaining two quarters, the National Centre for Socio-economic Information and Forecast (NCIF) said, anticipating that GDP’s growth rates in Q3 and Q4 2018 will be 6.72 per cent and 6.56 percent, respectively.
The GDP’s lower growth rates were because the slowdown in the country’s some key industries. GSO’s data showed although processing and manufacturing continued to post a fast growth pace in the first half of the year, it has slowed down from 15.7 percent in Q1 to just 10.1 percent in Q2.
According to Dang Duc Anh, head of NCIF’s Analysis and Forecast Division, resources for economic growth in the coming months are unclear while the driving force from the FDI sector is also reducing. Besides, business climate improvement policies haven’t been clearly seen.
As for external risks, experts said that the appreciation of the US dollar against VND due to the possibility of the US Federal Reserve’s two more interest rate hikes from now to the year-end will also put pressure on the country’s economic growth in the remaining months.
In addition, Vietnam will also face impacts from the US-China trade conflict, head of the NCIF’s World Economy section Tran Toan Thang said, adding that the trade conflict, geopolitical risks and the US’s taxation policy reforms will affect investment decision of multi-national American companies.
The reduction of corporate income tax in the US may also trigger a wave of tax cut or more investment incentives in some countries to keep US businesses, which could impact the competitiveness of Vietnam’s investment environment, Thang said.
Taking bold measures
Experts suggested that Vietnam should create a more transparent investment climate, improve technological capacity to attract more FDI companies, and actively respond to the US-China trade conflict’s impacts to maintain the growth momentum for the coming time.
Luu Bich Ho, former Director of the Vietnam Institute for Development Strategies at the Ministry of Planning and Investment, said that amid US-China trade tensions, it is necessary to prevent Chinese goods from taking advantage of the Vietnamese market to falsify their origin to export to the US, or Vietnam could be taxed in a way China has been.
The country also needs to press on with developing processing and manufacturing and pay more attention to seeking export markets, Ho said.
Besides, experts also suggested facilitating ongoing key projects in order to soon put them into operation, creating impulses for economic growth.
Nguyen Dinh Cung, head of the Central Institute for Economic Management, proposed seeking new driving forces right in the domestic economy, explaining that if Hanoi, Ho Chi Minh City and the central city of Da Nang grow 1 percent each, the national economy would expand by 0.5 percent.
Prime Minister Nguyen Xuan Phuc has recently also tasked the national steering committee on economic restructuring and growth model reform with seeking ways to create new momentum for the national economy, describing this as a decisive factor to make the national economy develop sustainably and avoid lagging behind.
According to Phuc, growth quality has been improved over the past time, with contributions of the total factor productivity increasing from 33 percent during 2011-2015 to 40.68 percent in 2016 and 45.19 percent last year, however, shortcomings in mechanisms, policies and laws have hindered the implementation of economic restructuring and growth model reform solutions.
Source: HNT
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