12:07 | 06/11/2016 Economy- Society
(VEN) - The World Bank (WB) recently lowered its Vietnam growth forecast for this year to six percent, down 0.2 percentage point from its June forecast. Prior to that, at its regular meeting in September, the government agreed with the 6.3-6.5 percent growth target set for this year.
Promoting development based on actual conditions
At a recent government press conference, Minister Mai Tien Dung, Head of the Government Office, said that at the meeting in September, Prime Minister Nguyen Xuan Phuc showed strong determination to achieve the growth target set for this year. However, the National Assembly’s 6.7 percent target proved to be unfeasible, so the government has lowered the growth target to 6.3-6.5 percent to ensure the quality of growth rather than pursuing increases in quantity.
This adjustment was made based on macroeconomic factors such as production growth, exports, and efforts to curb inflation, as well as the impacts of subjective and objective elements. In the first three quarters of this year, Vietnam achieved a gross domestic product (GDP) growth rate of 5.92 percent, lower compared with the same period last year. The mining industry continued to decline, while agricultural growth was low, and the industrial sector grew at a lower rate compared with the same period last year.
Lowering the growth target is for the economy to develop in a sustainable manner based on its actual conditions rather than growing beyond its capacity.
WB Senior Economist Sebastian Eckardt said the Vietnamese economy is still resilient to unfavorable factors including the global economic slowdown. Although Vietnam’s economic growth cooled down in the first three quarters due to the severe impacts of heavy droughts on the agricultural sector and the fall of the industrial sector, macroeconomic stability was ensured and inflationary pressure was insignificant.
The government adjusted the growth target for 2016 based on macroeconomic results achieved since the beginning of the year. At the meeting in September, Prime Minister Nguyen Xuan Phuc indicated satisfactory results inspiring the government’s determination to achieve this target. Specifically, the Vietnamese economy continued to recover and achieved a 6.4 percent growth rate in the third quarter. Since the beginning of 2016, it has grown 5.92 percent with inflation being curbed at a low rate.
The driving force of growth
To achieve the 6.3-6.5 percent GDP growth target, Vietnam needs to achieve an economic growth rate of 7.1-7.7 percent in the fourth quarter. This is a big challenge for the country. A good sign which could help Vietnam to achieve its growth target is that GDP usually tends to rise in the last quarter (6.96 percent in the fourth quarter of 2014, and 7.01 percent in the fourth quarter of 2015). Economists, therefore, expect appropriate measures would be the driving force of growth.
Based on the results of surveys on the development trends of processing and manufacturing businesses, the situation in the fourth quarter is forecasted to be better than the third quarter, especially businesses with foreign investment and state-owned enterprises. Specifically, 48.8 percent of surveyed businesses predicted their situation would improve; 36.8 percent expected there would be no big changes, while a mere 14.4 percent thought they would face more difficulties.
The processing and manufacturing industries achieved a higher growth rate in the first three quarters compared with the same period last year, providing a significant support for the entire economy. The inventory growth of these sectors in the first nine months (nine percent) was also lower compared with the same period last year (9.9 percent).
The economy has shown positive signs, especially in September, creating a motivation for accelerating and improving growth quality. In the first nine months, Vietnam saw 81,500 new businesses established nationwide, a rise of 20 percent compared with the same period last year. In September, the attraction of foreign investment, both direct and indirect, brought satisfactory results; trade deficit continued to rise; overseas remittances in the manufacturing sector increased. Notably, the agricultural sector resumed its growth in the third quarter, 0.65 percent, following negative growth in the previous two quarters.
According to General Statistics Office of Vietnam General Director Nguyen Bich Lam, 95.8 percent of new businesses established in the first three quarters have commenced operations. In his opinion, this was a good sign of the economy. He believes agricultural restructuring will increase this sector’s contributions to the growth of the entire economy, and efforts to promote domestic sales of goods and services will create a significant driving force for sustainable economic growth.
According to Minister Mai Tien Dung, Head of the Government Office, the government is determined to achieve growth targets but focuses attention on ensuring the quality of growth rather than pursuing increases in quantity.