The Ministry of Planning and Investment (MPI) has drawn up three scenarios for the economy in 2016 based on first half figures, with the best scenario seeing the GDP target of 6.7 per cent being met.

MPI spoke about the three scenarios at the government’s July meeting but some economists doubt that Vietnam will reach its GDP target for this year.

With the current state of economy there is a need to enhance the growth of industries with potential to cover the losses in the agriculture sector during the first half, according to Minister of Planning and Investment Nguyen Chi Dung.

The World Bank has reduced its forecast for Vietnam’s economic growth in 2016 from 6.2 per cent to 6 per cent due to negative impacts from both external and domestic factors, according to its Vietnam’s Recent Economic Developments report released in July.

The first MPI scenario has second half GDP growth at 6.83 per cent. In this case, growth in the primary sector (agriculture) will be 1.18 per cent, the secondary sector (manufacturing) 7.99 per cent, and the tertiary sector (services) 6.79 per cent. 2016’s GDP growth rate, in turn, will reach 6.27 per cent. This is the scenario most selected by international organizations.

According to MPI, Vietnam is “absolutely able to achieve” a target of 6.27 per cent.

The second scenario has second half growth at 7.23 per cent, with the primary sector growing 2.045 per cent, the secondary sector 8.13 per cent, and the tertiary sector 6.78 per cent. Annual growth would therefore reach 6.5 per cent. According to MPI, the economy is “able to achieve” this level of growth.

The third scenario has GDP growth at 7.57 per cent, and “is the most positive scenario,” according to Minister Dung. Growth in the primary sector is to be 2.25 per cent, the secondary sector 8.44 per cent, and the tertiary sector 7 per cent.

Annual growth would then reach the National Assembly’s (NA) target of 6.7 per cent.

Many experts, though, point out that the economy faces many obstacles this year. During the first seven months not only agriculture saw negative growth but manufacturing also experienced difficulties, with growth at only 7.2 per cent year-on-year. 

This pales in comparison with the 10 per cent growth recorded in the same period last year.

The services sector, meanwhile, grew 7.4 per cent in the first seven months, down from 8 per cent last year.

Vietnam’s exports in the first seven months were $96.83 billion, up 5.3 per cent year-on-year but lower than the 9.2 per cent recorded in the same period last year and well short of the NA’s target of 10 per cent.

Disbursement remained slow in the first seven months. As at July 31 the disbursement of State budget funds and government bonds reached only 36.7 per cent and 25 per cent of the NA’s plan, respectively.

“From the drought and salinity in the Mekong Delta to the Formosa pollution incident, the new government has taken over an economy with many issues,” according to economist Le Dang Doanh, a former leader of the Central Institute for Economic Management (CIEM). 

“Assessments of the current state of the economy therefore need to be realistic and accurate so there will be appropriate solutions adopted. Issues regarding public debt and regular government expenditure also need to be dealt with carefully.”

The government has been attempting to stimulate the economy by quickening the disbursement process of investment and development funding. Despite the difficult state of the economy, the government and the NA reaffirmed in July that they would not adjust any targets.

The government’s determination to reach this year’s GDP target has been applauded by most of the public. However, Director of CIEM Nguyen Dinh Cung joined other economists in saying this would be “impossible”.

“GDP growth is always higher in the second half of the year compared to the first half,” according to the former leader of the Ministry of Finance’s Market and Price Research Institute, Mr. Vu Dinh Anh. While he believes GDP will increase, “it is very unlikely to reach the 6.7 per cent target.”

In order to reach 6.7 per cent, Minister Dung emphasized the need to enhance the growth of industries with potential such as construction, services, and tourism. “Ministries and authorities need to take drastic action to cover the losses seen in agriculture in the first half,” he said.

NA Secretary General Mr. Nguyen Hanh Phuc said that the government should not extract more crude oil to meet GDP growth. “Crude oil is a limited resource so extraction needs to be effective and it must not be sold at the existing low price,” he added.

VN Economic Times