10:05 | 25/01/2019 Society
(VEN) - The National Financial Supervisory Commission (NFSC) is forecasting a seven percent growth rate for the Vietnamese economy in 2019 with inflation of 3.6 percent, equivalent to that of 2018 and lower than the four percent target set by the National Assembly.
Highest growth rate in a decade
According to the Vietnamese government, Vietnam’s gross domestic product (GDP) grew 7.08 percent in 2018 - the highest rate in the past decade - with major contributions from the processing and manufacturing industries and the service sector. Inflation was kept below 3.6 percent.
According to Dang Ngoc Tu, Head of the NFSC's Research and Policy Coordination Unit, major economic balances were maintained in 2018. The international payment balance posted a high surplus; public debt and state budget balance were effectively controlled, meeting the targets set by the National Assembly. The financial foundation was strengthened, fostering economic growth; capital supply by the banking sector decreased but improved in efficiency and quality; the liquidity of the banking system was ensured; interest and exchange rates were stable. The securities market grew impressively with its capitalization value reaching 75 percent of Vietnam's GDP, exceeding the target set for 2020.
Dr. Nguyen Xuan Thanh, a lecturer on public policy at Fulbright University Vietnam, said the processing industry and the service sector were major driving forces of Vietnam's economic growth in 2018. He also pointed to basic changes in the two sectors' contributions. The manufacturing of telephones and electronic devices, which grew 20-30 percent in 2017, posted growth of only 11 percent in the first 11 months of 2018. However, the manufacturing of import-substituting products such as automobiles and pharmaceuticals contributed strongly to economic growth. Notably, according to Dr. Thanh, the Vietnamese economy was not dependent on credit in 2018.
The business engine
The Vietnamese economy is hopeful and optimistic about its stable growth in 2019 and ensuing years, as well as its ability to maintain and make the most of its advantages.
NFSC forecasts are based on the progress Vietnam has made in recent years. The economy has overcome major obstacles with the help of a constructive government dedicated to advancing business interests.
The private sector is forecast to be a driving force of economic growth in 2019. Its contribution to Vietnam's GDP keeps increasing, while the public sector's percentage in GDP tends to decrease. Authorities have prioritized the improvement of the investment and business environment. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) that takes effect in 2019 will also create additional opportunities for Vietnam to attract foreign investment.
Truong Van Phuoc, Acting Chairman of the NFSC, believes to achieve the seven percent GDP growth target set for 2019, along with accelerating institutional reforms and improving the business environment, Vietnam needs to maintain financial stability. The shift of manufacturing facilities to Vietnam as a result of trade friction between China and the United States, and new-generation free trade agreements (FTAs), such as the CPTPP and the EU-Vietnam FTA, are expected to have a positive effect on Vietnam's economic growth in 2019. The inflation rate can be curbed at around four percent if public service costs are tightly controlled.
In the opinion of former governor of the State Bank of Vietnam Le Duc Thuy, policies to control the consumer price index in 2019 should be flexible, and the four percent inflation rate projected for 2019 should be adjustable within a range of 0.5 percent.
The Vietnamese economy is vulnerable to changes in the global economy. Therefore, maintaining financial stability
should continue to be a priority in state management policies.