The World Bank earlier this week stated that Vietnam’s growth momentum has moderated since the beginning of the year, but “outlook remains positive.”
In light of the moderation in economic activity during the first quarter of 2019 in Vietnam and subdued global growth and an escalation of trade tensions, the World Bank’s baseline forecast projects real GDP growth in Vietnam at 6.6% in 2019 and 6.5% in both 2020 and 2021.
However, this forecast was based on calculations in the first four months, and if all the data from the first six months of the year had been taken into account, the growth rate of Vietnam might have been around 6.8%.
According to the General Statistics Office (GSO), Vietnam’s GDP climbed 6.76% on-year, lower than the 7.05% rise in the same period last year, but much higher than the average growth rate of 5.53% in the 2011-2017 period.
Specifically, GDP in the second quarter of 2019 is estimated to increase 6.71% on-year, in which the agro-forestry-fishery sector grew 2.19%, the industry and construction sector 9.14%, and the service sector 6.85%.
In the first six months of 2019, GDP climbed 6.76%, lower than the 7.05% rise in the same period last year, but higher than in the corresponding periods of 2011 (5.92%, 2012 (4.93%), 2013 (4.9%), 2014 (5.22%), 2015 (6.3%), 2016 (5.65%), and 2017 (5.83%).
In the first half of this year, the agro-forestry-fishery sector increased 2.39% (holding 6% of GDP growth), the industry and construction sector 8.93% (creating 51.8% of GDP growth), and the service sector 6.69% (responsible for 42.2% of GDP growth).
“Recent slower growth reflected the repercussions of unfavourable external factors on key economic sectors. The outbreak of African swine fever and a decline in international prices dampened agricultural outputs while weaker external demand moderated growth of the export-oriented manufacturing sector,” said Sebastian Eckardt, lead economist of the World Bank in Vietnam. “But overall, the economic outlook for Vietnam this year is quite positive.”
He also said that Vietnam’s ratification of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and signing of the EU-Free Trade Agreement are strengthening the confidence of investors, and signaling a rise in exports which are one of the key pillars of economic growth.
The total six-month export turnover hit US$245.48 billion, also the highest six-month level ever untill now, according to the GSO.
Under the GSO’s survey on the business trends of manufacturing and processing enterprises in Vietnam’s second quarter of the year released more than one week ago, 45.2% of respondents said their second-quarter performance is better than in the first quarter, and only 16.5% claimed that they faced difficulties.
Some 52% expected that their performance will get better in the third quarter, when only 11.4% believed they will hit difficulties.
Last week, Asian Development Bank (ADB) president Takehiko Nakao met with Vietnamese Prime Minister Nguyen Xuan Phuc in Japan, stating that he is impressed at Vietnam’s solid growth rate of 6.76% in the first half of 2019 and 7.1% in 2018 - the fastest growth rate in more than a decade.
“Vietnam continues to demonstrate strong potential for sustaining high economic growth, given its prudent fiscal management, stable inflation, healthy current account balance, and strong foreign direct investments. Vietnam is also positioning itself effectively in the changing landscape of regional and global value chains,” Nakao said.
The ADB said the Vietnamese economy remains strong at 6.8% in 2019 and 6.7% in 2020.
It is expected that in this year, Vietnam’s growth will be the highest in the region, with China (6.3% in 2019 and 6.1% in 2020), Indonesia (5.2% in 2019 and 5.3% in 2020) or the Philippines (6.4% in 2019 and 6.4% next year).
The Vietnamese government has set an economic growth target of 6.6-6.8% this year. But according to the World Bank, higher growth of Vietnam will be undermined by a series of internal and external factors.
The outlook is subject to risks – both domestic and external. Vietnam needs to prepare to adjust macroeconomic policies in case some of these risks materialise and lead to a deeper than expected downturn.
“Against the backdrop of a strong cyclical recovery over the last few years, Vietnam started to tighten credit and fiscal policies to rebuild policy buffers. While growth has so far remained robust, a further deterioration of economic activity may call for an adjustment in the macroeconomic policy stance towards more accommodative monetary policy possibly supported by some fiscal stimulus,” stated a World Bank update on Vietnam’s economy released last week. “In addition, deeper structural reforms, including regulatory, state-owned enterprise and banking sector reforms remain critical to boost investor confidence in the short term and raise potential growth in the medium term.”
Economic targets for 2019 set by the National Assembly
- GDP: grows 6.6-6.8%
- Total export turnover: up 7-8% year-on-year
- Trade deficit: below 3% of total export turnover
- Total development investment capital: 33-34% of GDP or VND2.036-2.097 quadrillion (US$88.52-91.17 billion).
- Consumer price index: 4%
- Total budget revenue: VND1.411,3 quadrillion (US$61.36 billion)
- Total budget deficit: VND222 trillion (US$9.65 billion), equivalent to about 3.6% of GDP.
