14:54 | 11/04/2016 Society
(VEN) - The Vietnamese economy is forecast to achieve stable growth of 6.7 percent in 2016 and around 6.5 percent in the following year, according to the Asian Development Bank (ADB) report on the Asian Development Outlook announced on March 30. This figure resembles the target set out by the National Assembly.
The Vietnamese economy is forecast to achieve stable growth of 6.7 percent in 2016 - Photo: Can Dung
Exports are expected to increase by 10 percent in 2016 and 14 percent in the coming year after free trade agreements take effect. Meanwhile, imports continue to increase in order to meet increasing demand on consumer goods and provide inputs for production. In addition, overseas remittances are forecast to humbly recover.
Industrial production and construction will maintain its growth. The purchasing managers index shows that business conditions against manufacturers were improved in the first two months of the year, with an increase in numbers of orders. Agriculture will temporarily fall due to low prices and a decline in production caused by the El Nino weather phenomenon, while services will strongly develop.
Inflation increased by 1.3 percent in the first quarter of this year and is expected to reach three percent in the whole year and four percent in the following year. The government prepares prices of educational and health services and minimum wages in the public sector to be increased.
The State Bank of Vietnam set out the credit growth target of 18-20 percent this year to promote stronger economic growth. Interest rates may face pressure to increase in the coming time because inflation and credit demand tend to increase, while bank liquidity becomes narrow.
Fiscal policies will be gradually tightened, while state budget overspending will decline to 4.9 percent of the gross domestic product by 2016 and 4 percent by 2017, according to the target set out by the government.
Following an ADB survey, businesses saw optimistic signals in economic development. Some 41 percent of businesses expect economic conditions to be improved, while 40 percent desire stability.
The report notes that Vietnam’s economic growth is being driven by foreign direct investment, strengthening domestic consumption and demand, and pro-growth policy settings.
“In the short term, the government must navigate the impacts of a slowing global economy, while at the same time rebuilding the macroeconomic buffers that would allow Vietnam to be resilient to any future economic shocks. Over the long term, greater efforts are also needed to address Vietnam’s low productivity growth, and to support domestic firm’s ability to integrate into global value chains,” ADB Country Director for Vietnam Eric Sidgwick said.
The report also indicates the importance of state-owned enterprise restructuring. The government should take actions to strengthen the banking system including a clear plan for dealing with bad debts.
When the economy is open, Vietnam will see more competition from rivals and businesses will also face increasing pressure.
Free trade agreements will take effect in the near future and businesses need to make good preparations to catch up opportunities.