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What’s behind the high GDP growth rate?

The high GDP growth rate of 5.64 percent reported for H1, when a number of large cities and provinces were under social distancing, businesses had to close, and people lost their livelihoods, has puzzled many people.



The size of the economy has been revised based on a different calculation method, increasing by 25 percent in 2021 to VND9 quadrillion. With the 5.64 percent GDP growth rate in H1, the economy has had VND507.6 trillion more.

Vietnam’s GDP prior to the revision in 2020 was VND6.3 quadrillion. And in order to have VND507.6 trillion more in H1, the growth rate would be 8 percent. This is a record high growth rate rarely recorded in the previous strategic periods.

The figures show that the sudden revision of GDP, increasing by 25 percent, has posed concerns, not only to economists but also to country management. Many public financial figures, including public debt, government debt, foreign debt, local authorities’ debt, SOE (state owned enterprise) debt, private enterprises’ debt and overexpenditures all have relations with GDP.

The high GDP growth rate in H1 is encouraging but a question has been raised if such a high GDP truly reflects all the difficulties faced by people and enterprises in the Covid-19 crisis.

For example, the total budget collection in H1 was estimated at VND775 trillion, or 57.7 percent of the yearly estimates. Will the high growth rate and high budget collection prompt cities and provinces to come up with the idea of building monuments like Thanh Hoa, which is going ahead with the VND255 billion monument project?

As for the economic structure in H1, GSO (General Statistics Office) reported that the agriculture – forestry – fisheries sector accounted for 12.15 percent, while industry and construction was 37.61 percent, services 41.13 percent, and taxes less subsidies on products 9.11 percent. The figures were 14.16 percent, 33.51 percent, 41.99 percent and 10.34 percent, respectively, for the same period last year.


The high GDP growth rate of 5.64 percent reported for H1, when a number of large cities and provinces were under social distancing, businesses had to close, and people lost their livelihoods, has puzzled many people.


Nguyen Dinh Cung, a respected economist, former Head of the Central Institute of Economic Management (CIEM) said it was strange that the agriculture sector’s growth rate in H1 2021 was higher than in previous years, while construction and industry were lower. However, the proportion of agriculture decreased.

He said he wondered why the revised GDP of an increase of 25 percent did not lead to GDP structure changes. Is the adjusted figure equally divided among regions? If so, the adjusted figure is not real.

A lot of questions

According to GSO, in terms of GDP use in the first 6 months of this year, final consumption increased by 3.56 percent over the same period of 2020; asset accumulation increased by 5.67 percent; exports of goods and services increased by 24.05 percent; and imports of goods and services increased by 22.76 percent.

Cung commented that if based on GDP by consumption, there would not even be a growth rate of 5.64 percent, because consumption was lower than the same period last year and the accumulation was similar, and imports exceeded exports.

The transport and warehousing sector dropped by 0.39 percent, leading to a 0.02 percentage point decrease; and accommodation and catering services fell 5.02 percent and 0.12 percentage point. These sectors keep decreasing perhaps because the damages they have incurred are too serious.

One of the biggest concerns is inflation. However, GSO reported that “input material prices increased in accordance with world prices; and electricity and water prices increased in accordance with consumption demand, which were the major reasons behind the CPI increase of 0.19 percent in June over the previous month, the 1.62 percent increase over December 2020, and the 2.41 percent over June 2020.

The CPI increased by 1.47 percent on average in H1 compared with the same period last year, the lowest increase since 2016. The core inflation rate of H1 was 0.87 percent.

H1 inflation was attributed by GSO to input material price increases.

A high GDP growth rate is good news, but this has raised a lot of questions. 

Tu Giang

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