The Hanoitimes - With growth rates in the agriculture, forestry, fishery and services sectors below those of in the same period of 2018, the FDI sector played a crucial role in economic expansion with its export value making up 70.9% of the country`s exports.
Vietnam’s GDP growth target of 6.8% in 2019 is feasible, despite the economy showing sign of slowdown in the first quarter, reaching 6.79% year-on-year and lower than the figure of the same period last year at 7.45%, according to the Vietnam Institute for Economic and Policy Research (VEPR).
“With growth rates in the agriculture, forestry, fishery and services sectors below those of in the same period of 2018, the FDI sector played a crucial role in economic expansion with its export value of US$41.46 billion, equivalent to 70.9% of the country's exports,” said VEPR’s Director Nguyen Duc Thanh at the launch of its quarterly macroeconomic report on April 11.
Overview of the conference. Source: Ngoc Thuy.
In the January – March period, China became Vietnam’s largest investor. According to Thanh, the Chinese capital inflow has created positive impacts on the domestic labor market and economic growth, at the same time posing risks to the environment and foreign labor management.
“It has come to the point that Vietnam has to revise its incentive policies for the FDI sector, which is vital to create a fair environment for all stakeholders,” Thanh stressed.
Forecast growth and inflation in 2019 (yoy). Source: VEPR.
With the Vietnamese economy’s high level of openness, the country is much exposed to growing global uncertainties, said banking expert Nguyen Tri Hieu, adding the country’s resilient capability against external shock is at moderate level.
Hieu expressed concern about Vietnam’s dependence on the FDI, as the sector’s exports account for 70% of the country’s total export revenue.
“This would cause a major problem for Vietnam when FDI enterprises change their policy and leave for another country,” Hieu stated.
Economist Pham The Anh pointed to the slow privatization pace of state-owned enterprises (SOEs) another risk to the economy.
“Difficulties in corporate valuation and lack of motivation from those SOEs in subject are main barriers to this process,” Anh said.
Regarding the business activities, while the number of newly established enterprises and new job did not differ much from the figures in the fourth quarter of 2018, the number of temporarily ceased enterprises in January was unusually high at 23,082 firms, the highest during the last 10 years, added Anh.
Meanwhile, inflation in the first quarter hit 2.63% due to the sudden climb in energy prices. The growth of consumption prices along with maximizing environmental protection taxes since early 2019 required a more cautious approach from the State Bank of Vietnam to control inflation risks, Anh suggested.
For the rest of 2019, Anh considered the ongoing US – China trade friction an opportunity for Vietnam’s economy.
However, in long-term, when the production supply chain shifts from China to neighboring countries, Vietnam needs to improve the institutional, business and labor environments to grasp the opportunities, Anh stated.
“The challenge for Vietnam is to move forward when the country’s infrastructure is not yet ready to receive waves of production shift, while there are no economies of scale like China and India,” Anh added.