Vietnam's economic growth forecast at 6.88% for the whole year: CIEM

Wednesday, 2018-10-17 17:08:15
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According to CIEM, high economic growth in the first two quarters of this year has reduced the pressure to achieve the economic growth targets in the last months of 2018. (Photo: NDO/Trung Hung)
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NDO – The positive socio-economic results in the first nine months of this year have helped to better visualise the economic growth prospects for 2018. With the key indicators of the economy witnessing positive developments, economic growth is forecast to reach 6.88% for the whole year.

>>> Think tank sets positive outlook for economic growth in 2018

The estimated data was provided by the Central Institute for Economic Management (CIEM) at a seminar themed "Vietnam's Economy: Deepening Reforms and Enhancing Investor Confidence", co-hosted by CIEM and the Australian-funded programme, Australia Supports Economic Reform in Vietnam (Aus4Reform), in Hanoi on October 17.

The workshop aimed to update and evaluate the macroeconomic developments in the third quarter and the outlook for the whole year, while giving recommendations on economic reform and macroeconomic management orientations in the last months of 2018 and the following years.

Priorities given to macroeconomic stability

According to CIEM's report, high economic growth in the first two quarters of this year will help to significantly reduce the pressure on achieving the economic growth targets in the last months of the year. Exports and the disbursements of foreign investment increased quite stably, helping to ensure the balance of the economy. Specifically, the GDP growth rate reached 6.88% in the third quarter and 6.98% in the first nine months, higher than that of the same period for many years. Export turnover was estimated at US$65.3 billion in the third quarter, up 15.1%, helping Vietnam achieve a trade surplus of nearly US$3 billion in the quarter and over US$6.3 billion in the first nine months.

The increasing trend in investment continued in the third quarter, with total social investment up 12.5% over the same period in 2017 and 21.6% over the second quarter. FDI disbursement continued to increase, reaching US$4.9 billion in the third quarter, up 2.1% over the same period last year and 9.1% over the previous quarter.

Average CPI increased by 4.14% in Q3 and 3.57% in the first nine months. Despite concerns regarding inflation risks at certain points, the 2018 inflation target (4% on average) is likely to be achieved.

All these positive signals are helping to significantly reduce the pressure on achieving the economic growth target in the fourth quarter, stated the CIEM.

Dr. Nguyen Dinh Cung, Head of CIEM, has said that macroeconomic stability and an improved investment environment are decisive to the "health" of Vietnam’s economy. (Photo: NDO/Trung Hung)

According to Head of CIEM, Dr. Nguyen Dinh Cung, the growth in the third quarter, which was the highest in eight years, was not a surprise, as Vietnam has stabilised the macro-economy in a stronger manner. In addition, the business environment has also improved significantly, reflected through the positive reviews from the business community and prestigious international financial institutions. These are two factors that are fundamental to the economy and a driving force for positive growth, affirmed Dr. Cung.

In addition, Nguyen Anh Duong, Head of Macroeconomic Policy Department (under the CIEM), said that the priority in maintaining macroeconomic stability in the third quarter has become more practical, proved by various positive moves from monetary and fiscal policies, such as that the revision of the Tax Administration Law has absorbed a number of suggestions in the direction of facilitating taxpayers; the issuance of government bonds has limited the encroachment impact on private investment and interest rates; and fiscal policy has not been hasty in the direction of loosening, but rather in coordination with monetary policy to consolidate macroeconomic stability and maintain resilience.

More importantly, Vietnam has initially shown its ability to cope with unfavourable fluctuations in exchange rates and interest rates from the world market through international economic integration channels.

With these positive developments, CIEM stated that the forecast for economic growth for the whole 2018 may be higher, at 6.88%, compared to 6.71% as per CIEM data released three months ago. In addition, full year export growth is forecast at 13.34%; trade surplus at US$5.1 billion; and average inflation at 3.97%.

Maintaining growth momentum - not too difficult but needs sustainability

The Jan-Sept period has helped shape an overview of the socio-economic development for the whole year. Accordingly, economic growth has not declined over each quarter as previous concerns, while the major balances of the economy witnessed positive developments. Therefore, according to Duong, maintaining the growth momentum in the next four to eight quarters is not too difficult, but the problem lies in how to ensure sustainability.

According to Nguyen Anh Duong, Head of CIEM’s Macroeconomic Policy Department, maintaining the growth momentum in the next few quarters will not be too difficult, but the growth should be sustainable. (Photo: NDO/Trung Hung)

In the immediate future, challenges are posed to Vietnam in macroeconomic management in the context of fluctuations in the world market, especially with the US-China trade tensions and US interest rate policy. In addition, global financial markets in general, and emerging markets in particular, are more vulnerable to the trend of increased protectionism and the volatility of investment flows.

Against this backdrop, the Vietnamese government has emphasised the need to strengthen macroeconomic fundamentals in order to create more policy dividend and to improve resilience in a volatile global economic environment. Meanwhile, progress in negotiating and ratifying new free trade agreements (FTAs) (such as the RCEP, CPTPP and EVFTA) could strengthen the confidence of foreign investors in Vietnam, making it important to further promote the ratification of important FTAs and encourage the private sector.

However, the CIEM stated that the commitment to maintain macroeconomic stability and economic restructuring is necessary, but not enough. Vietnam needs more efforts in strengthening its ability to monitor capital and commodity flows from foreign markets into Vietnam, plus a more flexible, pragmatic approach in economic its relations with key partners.

To sustain and accelerate the growth momentum, Dr. Cung also emphasised that policy priority should continue to focus on improving microeconomic fundamentals and reforming economic institutions towards being more friendly to innovation and the environment, coupled with effective handling of risks in the volatile international economic environment.