Experts predict the growth rates for this year and next may top 7%.
A variety of internal and external factors are contributing to Vietnam exceeding economic projections and outpacing its Southeast Asian peers, according to VnExpress. At a conference last week organized by the National Financial Supervisory Commission (NFSC), Nguyen Xuan Thanh, director of development and public policy lecturer at the Fulbright University of Vietnam, released the estimates and explained: "The major contributor of growth comes from industries that benefit from policies to replace import goods, such as automobile and pharmaceutical production." Private sector contributions and less reliance on credit have also fueled the growth, added Truong Van Phuoc, acting chairman of the NFSC.
The World Bank (WB) recently released their estimations for Vietnam's growth as well, with a similar forecast of at least 6.8% in growth. The number for this year is noticeably higher than the 6.3% attained by the region as a whole. Unlike the figures put forth by the NFSC, the WB report predicts that in accordance with global trends, growth in Vietnam will then slow to 6.6% and 6.5% for the following two years, respectively.
A separate report titled “Economic Insight: South-East Asia” recently released by the Institute of Chartered Accountants in England and Wales (ICAEW) put growth for Vietnam at 6.9% for the year, while noting that next year could see a decline due to less import demand from China. ICAEW Regional Director for Southeast Asia Mark Billington said: "Combined with a moderation in export growth, we expect GDP growth across all of the SEA economies to ease next year, as a result of the ongoing US-China trade conflict and tighter global monetary conditions."
Other reasons for caution include a reduction in global capital flow and foreign investment, a slowdown in reforming state-owned enterprises and banking sectors, and needed improvements in labor productivity. Sebastian Eckardt, the WB Lead Economist for Vietnam, told Vietnam News: “As an open economy, Vietnam needs to maintain a responsive monetary policy, exchange rate flexibility and low fiscal deficits to enhance its resilience against potential shocks.”
Trade deals set to go into effect next year, such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA), may help counter shocks. On a regional level, increased economic ties with neighboring nations such as Thailand and Indonesia will also help cushion the country from the US-China trade war. Additionally, a push in 4.0 technologies, domestic demand and regulatory reform will help future economic conditions, according to the above reports.
[Photo via Dan Tri]
