Prioritising macroeconomic stability, maintaining growth momentum

Friday, 2019-04-19 16:08:42
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Vietnam continues to prioritise macroeconomic stability and improve the business environment for the resilience of the economy.
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NDO – In the context of decent economic growth and improvements in the first quarter of 2019, the next goal is to continue stabilising the macroeconomic foundation to maintain the growth momentum in the remaining quarters of 2019, thus achieving the growth targets set for the whole year.

Positive macroeconomic growth in Q1

The Central Institute for Economic Management (CIEM), with support from the "Australia Supports Economic Reform in Vietnam" (Aus4Reform) programme, organised a workshop in Hanoi on April 19 to publish a report on "Vietnam’s economy in a violate world: Making reforms work for sustainable growth", to update, analyse and evaluate macroeconomic developments in the first quarter of 2019, as well as updating the macroeconomic prospects for the whole year and proposing orientations for economic reforms and policy solutions for macro-economic management and administration in 2019.

According to the latest report published by CIEM, in the first three months of the year, the macroeconomic indicators grew positively. Specifically, GDP growth in the first quarter reached 6.79%, though lower than the first quarter of 2018 (7.45%) and the initial scenario of the Government (6.93%), but still higher than the same period during 2009-2017.

The agriculture, forestry and fishery sectors still achieved good growth, reaching 2.68%. Meanwhile, the industry - construction and service sectors grew by 8.63% and 6.5%, respectively.

Private investment and FDI continued to be the bright spot, reflected in the structure of investment sources continuing the trend of shifting from narrowing the proportion of investment from the State sector and increasing the proportion of investment from the non-State sector. Total registered FDI reached US$10.8 billion in the first quarter, up 86.2% over the same period in 2018 and much higher than the same period in recent years. FDI disbursement reached US$4.12 billion, up 6.2%. Contributed capital to buy shares by foreign investors was estimated at US$5.69 billion, three times higher than the same period last year.

In particular, exports still maintained an increase with a total export value of US$58.86 billion, up 5.3%, thanks to a number of factors such as administrative reform, commercial banks offering finance support products, and most of the approved CPTPP country members have implemented double tax reductions for Vietnam.

The updated results predict that economic growth in 2019 is estimated at 6.88%. Export growth is forecast at 9.02%. Trade surplus is at US$3.1 billion. The increase in the consumer price index in the year is roughly 3.71%.

According to CIEM, Vietnam's economy continues to grow, with the recovery momentum in recent years witnessing an important contribution from the reforms of economic institutions in general and the business environment in particular.

Nguyen Anh Duong, Head of Macroeconomic Policy Department under the CIEM, analysed that financial management has seen some positive points, such as the coordination of fiscal policy with other macroeconomics economic policies have been significantly improved, restructuring the State budget has brought about positive effects, and operating fiscal policy has also been more flexible.

The average basic inflation increased by 1.83%, indicating that monetary policy management remains stable and has not put pressure on the price level.

Continuing to prioritise macroeconomic stability

After impressive socio-economic results in 2018, Vietnam is expected to continue its momentum in 2019, aiming to achieve the set targets for the 2016-2020 period. According to Dr. Nguyen Dinh Cung, Director of CIEM, the Government continues to emphasise the priority of macroeconomic stability, while improving the business environment and the resilience of the economy. Movements in economic growth and inflation continue to be closely monitored with various management measures throughout the first quarter.

However, Vietnam also identified multiple difficulties and challenges to realise that expectation, placed in the context of an increasingly uncertain international economy and room for macroeconomic policies to promote economic growth is not great.

For the remaining quarters of the year, CIEM said that macroeconomic developments may be influenced by certain external factors, including the risk of recession of the US economy, trade tension, and technical barriers for Vietnam's exports in foreign markets.

Nguyen Anh Duong, Head of Macroeconomic Policy Department of CIEM speaks at the event.

Nguyen Anh Duong said that, according to the latest updates, Vietnam is likely to realise this year's targets in growth, export, inflation and trade surplus, but it should still focus on strengthening its macroeconomic foundation, not only to realise the set goals for this year, but also in the next year and to prepare for the next 10 years.

According to Duong, the reforms that the Government has implemented are meaningful and need to be promoted. In addition, policy priorities should also emphasise macroeconomic stability to serve as a basis for reform. Amidst the uncertain global economy, Vietnam still needs to continue to build new scenarios, not to change policies but to respond to new developments and changes, affirmed Duong.

He also suggested that Vietnam should actively exchange with big economic partners such as Australia, New Zealand, Japan or European countries, because they are also affected by the violation in superpower economies like the US or China, and therefore also have their own coping experiences that can be shared with Vietnam. And vice versa, Vietnam also needs to create deeper dialogues with these partners so that it can grasp the fluctuations of the world economy, not only from superpowers but also view from smaller economies.