ADB forecasts 6.8 percent growth for Vietnam in 2019

14:27 | 19/05/2019 Society

(VEN) - Vietnam’s economic growth will moderate but remain strong in the next two years, growing 6.8 percent in 2019 and 6.7 percent in 2020, according to the Asian Development Bank’s (ADB) annual report.

adb forecasts 68 percent growth for vietnam in 2019

Eric Sidgwick, ADB Country Director for Vietnam, said Vietnam’s economic performance reached a high level in 2018, driven by strong exports and domestic demand. Economic growth will likely hold up well in the near term, supported by export-oriented manufacturing, foreign direct investment, and sustained domestic demand.

Robust private consumption, continued expansion of manufacturing, services, and agriculture, and greater market access for Vietnam’s exports under various free trade agreements will continue to fuel growth.

ADB also forecasts that inflation will continue to average 3.5 percent this year, before edging up to 3.8 percent in 2020. According to ADB, the announcement of the US Federal Reserve leaving its key interest rate unchanged and projecting no rate hikes in 2019 will help reduce pressure on the Vietnamese dong and inflation. However, upward adjustments to administered fees for public education, healthcare and electricity may add to inflationary pressures.

The report also mentions risks for Vietnam’s economy from the weakening of the world’s major economies - Vietnam’s key trading partners like the US and China. Vietnam is one of the most trade-dependent countries in the region, with trade volume reaching twice the size of its gross domestic product.

Domestically, sluggish progress in reform of state-owned enterprises could be a drag on growth, the report’s authors warn, pointing out that the equitization of state-owned enterprises in 2018 fell far short of the government’s target. The report underlines the importance of strengthening private firms’ integration in global value chains, which is a key policy challenge for the country’s long-term growth.

The report recommends improving the access of small- and medium-sized enterprises (SMEs) to finance and enhancing the capabilities of their human resources to enable them to better adopt new technologies and attain more value in global value chains.

The report points out that Vietnam’s participation in global value chains is largely driven by foreign-owned companies. Domestic private firms are predominantly SMEs and few have established effective linkages with the FDI sector. Many suffer from limited access to finance, skill shortages, and limited capacity to purchase and adapt newer technologies and foster innovation.

Weaker global trade demand and the slowdown of advanced economies will narrow Vietnam’s current account

surplus to 2.5 percent of GDP this year and two percent in 2020.

Phuong Vu