Vietnam heading for spot on list of top 20 world economies

10:45 | 20/02/2019 Society

(VEN) - Vietnam’s gross domestic product (GDP) increased by 7.08 percent in 2018. For this reason, Vietnam has become one of the world’s 11 fastest growing economies over the past two decades and is expected to become one of the world’s top 20 economies by 2050.

vietnam heading for spot on list of top 20 world economies
Training high quality workforce

Optimistic outlook

In September 2018, the McKinsey Global Institute (MGI) presented its annual report on “Outperformers: High-growth emerging economies and the companies that propel them”, looking at the track record of 71 developing economies and their future prospects, pointing to 18 outperforming countries.

Among the 18 outperformers are seven economies that grew more than 3.5 percent per year in terms of per capita gross domestic product (GDP) from 1965-2016, including China, Hong Kong (China), Indonesia, Malaysia, Singapore, the Republic of Korea (RoK), and Thailand. The remaining 11 economies, including Azerbaijan, Belarus, Cambodia, Ethiopia, India, Kazakhstan, Laos, Myanmar, Turkmenistan, Uzbekistan and Vietnam, recorded faster growth, about five percent per year, from 1996-2016.

According to a PricewaterhouseCoopers (PwC) report updated in 2018, while it predicted two years ago that Vietnam would become the world’s 22nd largest economy by 2050, PwC forecast later last year that the country would become the world’s 20th biggest economy by the same year. PwC forecast that Vietnam, India and Bangladesh would become the fastest growing economies with an annual growth of five percent from now to 2050.

The World Bank (WB) and the Asian Development Bank (ADB) all increased their 2018 growth forecasts for Vietnam from 6.7 to 6.8 percent. Meanwhile, through its final report for 2018, the National Financial Supervisory Commission has increased its GDP growth forecast for Vietnam from 6.7 to 7 percent.

The Ministry of Planning and Investment’s National Center for Socio-Economic Information and Forecast (NCIF) agreed with the seven-percent growth forecast for 2018 when setting two growth scenarios of 6.8 and 7 and 7.02 and 7.2 percent for 2019 and 2020, respectively.

vietnam heading for spot on list of top 20 world economies
Applying advanced science and technology in production

Key economic drivers

What new growth drivers will Vietnam have when the old ones such as cheap labor costs, credit and export growth reach saturation point, Prime Minister Nguyen Xuan Phuc asked at a recent regular government meeting. Deeper analysis of the current Vietnamese economy is crucial to answering this question, with the development of the urban, private economic sector and agricultural being viable prospects, the Prime Minister said.

The high abundant agricultural labor force rate of 42 percent, for example, is a major cause of low labor productivity, he said. Therefore, apart from developing the private economic sector, including household businesses, and addressing the agricultural workforce problem, Vietnam needs to solve the productivity problem through reallocation of human resources in the country, the Prime Minister said.

Dinh Thi Quynh Van, General Director of PwC Vietnam, said Vietnam needs to implement economic restructuring on a more sustainable basis, improve its institutions, and better its education and training sector so workers can contribute efficiently to long-term economic growth if it is to succeed on the world economic playing ground.

Anu Madgavkar from PwC said outperforming economies promote growth of the public and private sectors in order to increase productivity, income and demand. Large enterprises should play a major role in promoting per capita GDP growth, she said. If Vietnam has not done so thus far, it should; if Vietnam has done so, it should do it better, Anu Madgavkar said.

Dr. Dang Duc Anh from the National Center for Socio-Economic Information and Forecast said Vietnam has three new growth drivers including private economic sector development, institutional and business environment reform, and improvement of science and technology application and of labor productivity. It is necessary to pay attention to challenges related to the limited space for fiscal and monetary policies and put greater pressure on macroeconomic stability in the coming years, Anh said.

Quang Loc