Two growth scenarios in 2019

12-Mar-2019 Intellasia | Thoi bao Ngan hang | 6:00 AM Print This Post

The Ministry of Planning an Investment (MPI) has released the report on the implementation of Resolution 01/NQ-CP and the socio-economic situation in February and the first two months of 2019, in which the MPI has updated two plans for growth in 2019 with growth rates of respectively 6.6 percent and 6.8 percent.

According to the MPI, there are numerous number of driving forces for the economic growth of Vietnam in 2019. The driving forces come from the high and comprehensive economic growth momentum in 2018, the continuous improvement of business environment, the acceleration of the economic restructuring associated with the growth model. In addition, the economy has been supplemented with many new production capacities, while international trade activities are expanding, etc.

Nevertheless, in addition to the driving forces, the report also pointed out many difficulties and challenges to the economy, such as the risk of hiding the origin of goods of some countries into Vietnam, the change of supply chains when the US-China trade war is rising, the process of completing institutions and restructuring the economy which is facing many big challenges in the context when the economy is increasingly integrating into the international economy. The participation in the new free trade agreements (such as CPTPP and EVFTA, etc.) is also a significant challenge as these agreements have higher requirements and must fully carry out all international commitments.

In addition, the urbanisation trend with people moving to cities is creating pressure on infrastructure, environment and social security, the fast aging population is putting great pressure on the social security system in Vietnam. Particularly, Vietnam is facing faster climate change with stronger impacts.

Another challenge pointed out in the report is that the 4.0 technology revolution is requiring countries pursuing export-based and foreign investment-based economic development strategy like Vietnam to make adjustments in their economic development policies.

Based on the realised figures in the first two months of 2019, the MPI estimated the Gross Domestic Product (GDP) growth in the first quarter at 6.58 percent, less than the lower level of 6.76 percent estimated in the first estimation built in the end of November 2018.

In such context, the MPI recommended that in order to reach the GDP growth rate built in the initial plan, ministries, industries and localities must make the utmost effort to take advantage of every opportunity both domestically and internationally, focusing on implementing measures to boost production and business in order to gain higher growth of industrial and construction sector in the remaining quarters of the year.

Specifically, for the first scenario in which the 2019 GDP grows by 6.8 percent over 2018, the agriculture, forestry and fishery sector, service sector and the quarterly product tax excluding subsidies remains unchanged compared to the initial estimation; while the industrial and construction sector increases by 9.11 percent in the second quarter (Q2), 9.28 percent in Q3, and 8.02 percent in Q4, in order to gain an overall growth of 8.57 percent set in the first scenario. The GDP in Q2, Q3 and Q4 are forecasted to go up by respectively 6.77 percent, 7.13 percent and 6.7 percent.

For the second scenario in which the 2019 GDP growth is 6.6 percent compared to 2018, the agriculture, forestry and fishery sector and product tax excluding subsidies remains the same compared to the initial estimation; while industrial and construction sector grows by 8.75 percent in Q2, 8.91 percent in Q3, and 7.63 percent in Q4 to reach an overall growth of 8.26 percent set in the first scenario. The GDP in Q2, Q3 and Q4 are forecasted to increase by respectively 6.55 percent, 6.89 percent and 6.4 percent.

According to the MPI, since March is the last month of Q1, it is necessary to stay focused and actively carry out tasks and solutions to promote production and economic growth, with the aim to fulfil the socio-economic development tasks set in Q1 and the whole year.

In order to do so, the monetary policy should continue to be prudent and flexible, with strict coordination with fiscal and other macro policies to stabilise the macro-economy, control inflation and support growth. At the same time, public investment disbursement should be accelerated right from the first months of the year, particularly the infrastructure works damaged by natural disasters, big projects, important projects, national-targeted programmes, ensuring full disbursement of all public investment capital allocated in 2019.

The investment and business environment should continue to be improved strongly and substantially, competitiveness needs to be enhanced. The policies to support small and medium enterprises (SMEs), cooperatives, and individual business households should be effectively implemented. Innovation, start-up and business development need to be strongly encouraged. The foreign investment attraction should be selective, prioritising the use of high technology and environmentally friendly projects associated with the development of supporting industries, targeting large-scale Foreign Direct Investment (FDI) firms with global value chains.

Ministries, industries and localities also need to closely monitor the changes in prices; the domestic and the world markets; the US-China trade war developments; fluctuations of the US dollar and Chinese yuan and prices of items such as gasoline, pork, construction materials, transport services, etc. to promptly handle arising problems, ensuring the target of inflation control.

The price adjustments of the goods managed by the State needs to be prudent, avoiding increasing prices of numerous goods and services at the same time or in the last months of the year in order to not affect the national consumer price and increase expected inflation, etc.

 

Category: Economy, Vietnam

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