So far, with its impressive economic growth rate of 7.08% last year, exceeding the initial target of 6.7%, the Vietnamese economy has been hailed by the international community as one of the fastest growing economies in the world.
“Weathering difficulties, we have reached a very impressive growth rate, at an estimated 7.08%, the highest level since 2008. The growth quality has significantly improved in almost all indexes,” Prime Minister Nguyen Xuan Phuc stated.
This rate has also been higher than recent forecasts by high-profile international organisations, such as Standard Chartered Bank (7%), the World Bank (6.8%), the Asian Development Bank (6.9%), Fitch Solutions (7%), and Union Bank of Switzerland (6.6%).
“The growth rate for 2018 has affirmed the timeliness and effectiveness of the solutions enacted by the government. It also reflected the great efforts by all of the Party, state, ministries, agencies, localities, people, and enterprises,” PM Phuc said.
Quality on the rise
Though the growth rate is quite high, the economy’s credit growth has increased below 14%, lower than 17-18% recorded in the previous years. This reflects that the economy has grown in quality.
According to the Ministry of Planning and Investment (MPI), since early 2016 when the new government was elected, the contribution of the total-factor productivity (TFP) has kept rising.
Specifically, the TFP ratio in the economy stood at 33.58% in the 2011-2015 period, but rose to 43.29% in 2016-2018. Last year, the ratio sat at 43.5%.
TFP is a measure of the efficiency of all inputs to a production process. Rises in TFP result usually from technological innovations or improvements.
Meanwhile, the economy’s labour productivity has also ascended by 5.93% from US$4,166 per labourer in 2017 to US$4,512 in 2018. In 2016, the figure was US$3,852 per labourer.
Vietnam’s per capita GDP is estimated to be US$2,587 for the last year, up by US$198 against 2017.
Besides, the economy’s incremental capital output ratio (ICOR), which is the additional capital required to increase one unit of output, has decreased from 6.42 in 2016 to 6.11 in 2017, and 5.97% in 2018. The average ICOR for the 2016-2018 period is 6.17%, higher than 6.25 of the 2011-2015 period.
MPI Minister Nguyen Chi Dung also stated that the private sector’s investment, which plays a crucial role in economic growth, is also on the rise.
Specifically, this type of investment is estimated to occupy 42.4% of the total economy investment in 2018, higher than the 40.6% last year and 38.9% in 2016, and the average of 38.3% in the 2011-2015 period.
“You see, all of the sectors in the economy developed comprehensively in 2018, creating great momentum for higher growth,” the minister said. “Specifically, the agro-forestry-fishery sector grew to a high level – 3.76%, the industrial and construction sector 8.85%, and the service sector 7.03%. Total revenue of retail and service consumption is also projected to climb to 11.7% for 2018.”
Notably, according to the minister, the processing and manufacturing sector, which contributes 80% of the economy’s industrial growth, continued its strong uptrend, at 11.9% in 2016, 14.5% in 2017, and 13% in 2018.
“In addition to the consumer price index controlled at an on-year rise of 3.54 per cent, many macro indexes such as public debt (down to 61.4 per cent), foreign exchanges, lending rate, banking liquidity and safety, credit growth, and foreign reserves have also been ensured at very positive levels.
The local investment and business climate has continued to significantly improve, with over 131,300 newly-established enterprises, and total registered capital of VND1.478 quadrillion ($64.26 billion), up 3.5% in the number of businesses and 14.1% in capital, as compared to 2017.
According to the General Statistics Office’s latest survey on manufacturing and processing firms in Vietnam in the fourth quarter of 2018, 47.3% of respondents expected their performance will get better in the first quarter of 2019, against the fourth quarter of 2018. About 88.3% of foreign businesses held that their performance in the first quarter of 2019 will be better than in the fourth quarter of 2018. The respective rates at Vietnam’s state-owned and privately-owned enterprises are 83.2 and 84%.
Vu Hong Thanh, Chairman of the National Assembly Economic Committee, also said that the economy has been clearly growing in a positive manner, with quality improved.
“One of the most outstanding points is that the trade balance has shifted from a deficit previously to a surplus over the past three years. Moreover, attraction and disbursement of foreign direct investment (FDI) have also been increasing. Especially, the ratio of FDI in the processing and manufacturing sector has also been growing,” Thanh said.
According to the government, Vietnam has witnessed a total export-import turnover of US$482.23 billion, up 11.84% on-year, including US$244.72 billion for exports and US$237.51 billion for imports. This will lead to a trade surplus of US$7.21 billion for 2018.
Furthermore, total FDI disbursement for 2018 is estimated to hit a record US$19.1 billion, up from the record figure of US$17.5 billion in 2017.
“All of these figures demonstrate the fact that the economy’s quality has been increasingly improved, and the economy has been strongly bettering its value chain,” Prime Minister Phuc said.
Prospects for 2019
Party General Secretary, State President Nguyen Phu Trong stressed that greater efforts must be made to hit a higher growth rate this year, with the macroeconomy continuing to be maintained.
“Prime Minister Nguyen Xuan Phuc stated that 2019 is considered by the government to be a year of ‘Speeding up, and making big breakthroughs’ in all sectors of the economy, and “All efforts must be made to reach the highest results,” MPI Minister Dung said.
“In 2019, Vietnam has to accelerate its efforts so that all socio-economic development goals set until 2020 can be hit successfully. Party General Secretary, State President Nguyen Phu Trong has ordered that, in 2019, growth must be higher than in 2018.”
According to the minister, much remains to be done not only for 2019 but also for the following years. Specifically, the government must keep boosting administrative reform, making it more convenient for businesses to join the market effectively, thereby reducing costs for enterprises to develop further.
“We have already done this job well over the past few years, but this effort must be multiplied in the coming years,” he said. “Besides, a focus must be laid on developing private enterprises. They have been strongly developing in number and quality. Many big projects in Vietnam have been participated in by private enterprises.”
Recently, the prime minister’s economic consultancy group proposed three growth scenarios for the 2018-2020 period, based on the economy’s normal conditions.
Under the first and second scenario, the average annual growth rate will be 6.86 and 6.91%, respectively. The third scenario, also the most optimistic one, is expected to see the rate at 7.06%. Especially in 2019, the economy is forecast by the group to grow 6.9-7%, with inflation to be kept at below 4 %, a bit higher than an on-year 3.54% climb of 2018.
“To reach our growth target for 2019, among many solutions, we will especially focus on the development of the private sector, with more policies and mechanisms in favour of it,” the PM said. “Vietnam’s growth model in the coming years will depend much more on an increase in labour productivity and the development of a digital economy. We foster Industry 4.0 as it offers us great potential to raise labour productivity. We will not only promote the country’s existing natural resources, but also, more importantly, enhance the aspiration and brainpower of more than 100 million Vietnamese people at home and abroad.”