Opportunities and challenges intertwine as Vietnam seeks 6.7% growth

Monday, 2017-07-03 09:19:30
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NDO - Vietnam’s economic growth accelerated to 6.17% in the second quarter, opening up new opportunities for the country to meet the full-year target of 6.7%. But challenges remain, requiring the government and businesses to make greater efforts to attain such a goal.

Accelerated growth

As growth in the first quarter was so low, at only 5.15%, it threatens the annual target of 6.7% set by the National Assembly for 2017. In May the government issued a resolution affirming that it remained committed to achieving the expansion rate of 6.7%. In early June, Prime Minister Nguyen Xuan Phuc continued to issue a directive on key measures to boost growth.

With the government’s aggressive action and efforts made among major economic groups, national growth saw a strong surge in the second quarter, said Ha Quang Tuyen, director of the National Accounts Department under the General Statistics Office (GSO). Notably manufacturing rose 12.09%, construction 9% and hospitality services 13%.

The mining sector contracted by 6% but was still better off in comparison with the previous quarter when it shrank 10%. Growth in the second quarter was 6.17%, one percentage point higher than the first quarter, which is a significant increase as the point gap between the first and second quarters averaged at only 0.3% in recent years.

But according to the GSO official, growth in the second half of 2017 must reach at least 7.4% in order to meet the full-year target of 6.7%, given growth in the first six months was estimated at 5.73%. This is not an easy goal to achieve especially when the economy is still faced with numerous challenges.

In the first six months, trade deficit widened to US$2.7 billion, compared with the surplus of US$3 billion in the same period last year. Inventories of goods remain high, making it difficult to maintain and expand production in the time ahead. Lower oil and coal prices have the potential to hurt the mining sector. In addition, the US Federal Reserve’s interest rate hike is expected to affect the exchange rate, causing difficulties for lowering lending rates.

Seizing opportunities

Despite highlighting numerous challenges facing the Vietnamese economy, Tuyen stated that there are also many opportunities. Specifically, 110,000 newly established enterprises in 2016, coupled with an additional 61,000 in the first half of the year, are a strong driver that could bolster growth in the remainder of the year.
Credit growth in the first six months reached only 7.54% while the full-year target is 18%, which means there is still considerable room for stronger growth in the third and fourth quarters, helping to drive various economic sectors, especially construction. In addition, the manufacturing sector is expected to continue its robust growth, projected at 23% for all of 2017.

From now until the end of the year, a number of power plants will be put into operation with capacity totalling 560 megawatts, helping to lift the growth of electricity generation and distribution to an estimated 11%. At the same time, tourism growth is expected to build on its strong performance in the first half of the year at 30.2%, making considerable contributions to growth in commerce, accommodation and catering services and transport.

GSO General Director Nguyen Bich Lam said that in order to achieve the 6.5% growth target, the government should focus on a number of measures, including continuing flexible monetary and fiscal policies to contain inflation and support growth. It is also necessary to stimulate credit growth, relax requirements of lending to production, household consumption and channel credit to priority sectors.

Furthermore, action is needed to boost total investment to 34-35% of the gross domestic product, accelerate public investment disbursement, develop a domestic retail network, restrict the acquisition of Vietnamese supermarket chains by foreign companies, and step up trade promotion activities to increase Vietnam’s exports.