Economy slows down in second quarter: VEPR

16-Jul-2019 Intellasia | The Saigon Times | 6:02 AM Print This Post

The nation’s gross domestic product (GDP) expanded 6.71 percent in the second quarter of this year, down from 6.79 percent in the previous quarter, stated Nguyen Duc Thanh, director of the Vietnam Institute for Economic and Policy Research (VEPR).

However, the growth rate was higher than that in the same period last year, Thanh said at a workshop on the country’s macroeconomic performance in the second quarter, held in Hanoi on July 11.

The slowdown in the second quarter resulted in lower growth in the first half of the year.

Specifically, the service sector reported an increase of 6.69 percent; the agro-forestry-fishery sector, 2.39 percent; and the manufacturing and construction sector, 8.93 percent. All were lower than the respective rates in the first half of 2018.

However, the industrial production index increased 9.7 percent year-on-year, helping enterprises stay optimistic about the economic outlook.

In addition, the total retail revenue from goods and services in the first six months reached VND2.4 quadrillion (US$103.5 billion), up 11.5 percent against the same period last year. If the price hike factor is excluded, the growth rate would be 8.7 percent.

In the period, foreign direct investment (FDI) pledges in the country rose 9.7 percent, above the 8.5 percent seen in the first half of last year. China remained Vietnam’s largest investor with $1.7 billion, followed by Japan and Hong Kong.

In the second quarter of the year, inflation picked up 2.65 percent year-on-year, leading the rate in the January-June period to reach 2.64 percent, the lowest in the past three years. However, inflation may surge in the coming years due to potential hikes in education, fuel and food prices.

Major economies have adjusted monetary policies that helps relieving pressure on the State Bank of Vietnam in the management of exchange and interest rates.

Vietnam was included on the United States’ list of countries being monitored for possible currency manipulation in May, forcing the central bank to manage the exchange rate flexibly. The devaluation of the dong is not a wise decision at this time, Thanh said.

Moreover, non-State-owned enterprises have expanded their operations, contributing significantly to the State budget and creating more jobs for labourers, while State-run firms have shown poor performance.

Therefore, Thanh proposed the government remove obstacles for non-State enterprises, create easier access to capital and new technologies and offer more preferential tax policies.

In addition, the equitisation of State-owned enterprises and the improvement of regulations to support private companies should be prioritised.

The country should also prioritise foreign investors who are willing to transfer technology and train labourers.

According to VEPR, the country should review its policies to ensure fairness between FDI and domestic firms, prevent the influx of FDI solely to take advantage of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the European Union-Vietnam Free Trade Agreement, and seek solutions to respond to the negative effects of the US-China trade war.

VEPR forecast Vietnam’s GDP would expand 6.96 percent this year, with inflation being maintained at 3.5 percent, given expectations of the strong GDP growth of over 7 percent in the remaining two quarters.


Category: Economy, Vietnam

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