2017 was a successful year for Vietnam boasting many new economic records with GDP rising to 6.81% in 2017 - the highest figure the country has recorded over the past ten years.

Economic experts predict that it will be difficult for the country to maintain its GDP growth in 2018 as it needs to readjust its focus on quality rather than quantity.

Record numbers

2017 has reflected the government’s greater efforts in accelerating reforms, improving management capability and implementing the tasks associated with socio-economic development. Nguyen Bich Lam, General Statistics Office (GSO) General Director said Vietnam witnessed it fastest growth rate since 2011 and grew faster than the average rates of South East Asian nations (5.2%), Asia (6%), and the world (3.6%).

Notably, Mr Lam attributed the 2.7 times growth or 17.8% of processing and manufacturing industries to the right track of transition of modernization and industrialization. Some high quality service sectors have reported their highest growth rate for 2011-2017 such as finance, banking, insurance and real estate 2017 was also a successful year for Vietnam’s trade expansion into the world. Export turnovers saw a three-fold increase against GDP growth (21.1%) – the highest rate in recent years.

In addition, the number of newly-established enterprises reached a record figure of 130,000 while FDI nearly hit the US$36 billion mark. Vietnam’s economy saw strong growth last year and macro-economic stability, according to the World Bank. Many economists were optimistic about the upward trend of the economy which bore positive signs throughout 2017.

The facts behind the figures

According to Vo Tri Thanh, former Deputy Head of the Central Institute for Economic Management (CIEM) despite the fulfillment of socio-economic targets, especially the GDP growth target, it should not to be complacent about these positive results.

He highlighted the fact that FDI businesses have significantly contributed to the high export growth as export turnovers have accounted for 73% of the country’s total export revenue.

MrThanh called for joint efforts to achieve higher economic growth as last year’s growth economic efficiency and incremental capital output ratio (ICOR) were still low. Vietnam has been transforming itself into a market economy in accordance with international commitments that need clear-cut reform orientations and market trust over the medium and long-term.

The senior expert recognised that the state owned enterprises (SOEs) restructuring process was conducted at a slow paced as shown by the still high costs of businesses despite drastic changes. Moreover, the problem of how to deal with the issue in a transparent and responsible way still fail to meet the aspiration of building a facilitating and action-oriented government.

Sharing the same viewpoint with economist Vo Tri Thanh, the director of the Vietnam Institute for Economic & Policy Research (VERP) Nguyen DucThanh, says the bottleneck hindering Vietnam’s economic growth is the poor state management and ineffective operations of State owned enterprises. Consequently, Duc Thanh has stressed that the crux of the matter is to boost all-level drastic reform to achieve a higher growth in the coming time.

Level of growth

Despite such difficulties, there are bright prospects for Vietnam’s economic growth in 2018 thanks to leverage for growth of 2017, especially from the private and FDI sectors.

CIEM Director Dr. Tran Dinh Thien says one of the highlights of the national economy in 2017 was capital contribution by the private economic sector that replaced slowly disbursed public investment capital.

For example, the Sungroup plans to spend 18 months building Quang Ninh airport and is expected to open new air routes in June this year. In contrast, it would take the State at least 15--20 years to build such an airport, said Mr Thien.

Prof. Dr. Nguyen Mai, chairman of Vietnam Association of Foreign Invested Enterprises (VAFIE) argues that the FDI sector would continue to stand as the driving force of Vietnam’s economic growth in 2018 as a result of the success of APEC Year 2017 the investment expansion plans of Japanese investors, and increased VN - index in the securities market along with the improved business climate, thereby giving positive signs for business and production over the coming years.

Although Vietnam’s economy sees the auspices of further growth in 2018, economists suggest that the growth target of 6.5%-6.7% this year is feasible.

Mr Lam from GSO notes that in 2018 and the following years, Vietnam’s economy still has to face up to a number of challenges. Accordingly, the World Economic Forum identified the top 10 big risks to development including weapons of mass destruction (WMD), extreme weather events, natural disasters, failure of climate change adaptation or mitigation, water crises, cyber-attacks, food crises, biodiversity loss and ecosystem collapse, large-scale involuntary migration, and epidemic diseases. Vietnam has to be prepared to confront six out of the top 10 risks, he adds. 

Economist Vo Tri Thanh was of the same opinion, saying that economic growth of 6.5%-6.7% is achievable for Vietnam.

The WB, ADB, and Standard Chartered Bank have recently given forecasts with very positive figures for Vietnam’s GDP growth in 2018 at 6.5%, 6.7%, and 6.8%, respectively. The recent message by the Government has shown its determination to achieve a GDP growth rate of 6.7% this year.

VOV