09 July 2017

Heated Growth or Ordinary Scenario


Vietnam’s economic growth in 2017 is forecast to have two scenarios: 6.7 per cent economic growth and 3.2 per cent inflation growth; or 6.37 per cent economic growth and 2.35 per cent inflation growth.

This was a common remark by experts at the announcement conference of Vietnam Annual Economic Report 2017 themed “Accelerating Reforms towards a Facilitating State” held by the Vietnam Centre for Economic and Policy Research (VEPR) under the Vietnam National University of Hanoi.

Vietnam’s overall macro economy is seeing great breakthroughs. In particular, the Central Party issued a resolution on completion of market economy mechanism (June 2017) which underlined institutional reform, business environment improvement, business facilitation, particularly the private sector. However, it is quite clear that Vietnam’s economic growth has slowed down and productivity has slowly improved but the spirit of a government of business facilitation, integrity and service is still widely addressed.

Remarking on a better scenario, Dr Nguyen Duc Thanh, Director of VEPR, said that Vietnam should oft for the second scenario to achieve a natural growth because the government will play a clear role as an enabler and follow the market economic mechanism. The government is a rule-maker, not a player. It creates an equitable, creative playing field province inspire entrepreneurship and sustain growth.

In the first scenario, to achieve 6.7 per cent of growth, Vietnam may have to produce more crude oil, he said. If this is the case, the government will have to urge all industries and fields to attain the desired growth. And thus far, oil and gas are still used to offset deficit values for GDP. If the economic scenario moves this way, the Government will go against its chosen facilitating role, place the precedent of applying administrative commands, planned thinking ways, and impose targets on the whole economy. Attempting to achieve the high growth target in the short term may lead to medium and short-term unsustainable growth, said Thanh.

He analysed that Vietnam needs to pay special attention to the fact that it may have to loose economic stability and slow down reforms and breakthroughs to achieve the high growth target because of some reasons: Domestic manufacturing sector is becoming weaker in expansive international integration; budget deficit and public debt are still posing a threat to Vietnam’s macroeconomic disadvantages; and spending on development investment tends to decrease. Budget revenue is only enough for regular expenditures, which tend to increase rapidly over time.

The Government must control the monetary policy, closely and independently, in regulating credit growth plans in 2017 and curtail inflation targets, he suggested. It may take into account some “rescue” measures, such as streamlining public employees and cutting back on regular expenditures, if possible, completely removing subsidies for activities funded by the State Budget like unionist works.

Sharing these viewpoints, former Trade Minister Truong Dinh Tuyen said that trading off for reform for growth poses many risks. Therefore, he recommended that Vietnam be consistent with its long-term growth plan, build a development-enabling State model from a commanding State model. The focus is institutional reform and investment environment improvement, enabling people and enterprises to do business in a fair and favourable competitive environment.

Meanwhile, Mr Nguyen Si Dung, former Vice Chairman of the Office of the National Assembly, noted many legal issues such as building the institutional environment enabling people and businesses to avoid policy risks. Legal rules and corridors must be predictable, associated with cost reduction, monopolistic elimination and economic expansion.

Anh Phuong



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