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GDP growth expected at 6.65% in 2018

Vietnam’s GDP growth in 2018 is expected to reach 6.65%, lower than 6.81% in 2017, said in Vietnam Institute for Economic and Policy Research (VEPR)’s report on January 16.

According to calculations by VEPR, the figure is forecasted to reach 6.65% lower than 6.81% in 2017 with inflation maintained at the threshold of 4%. In particular, quarterly economic growth will increase gradually with the lowest pace in the first quarter 2018 of 6.02% and highest in the fourth quarter with 7.27%.
 

The institute also named some inherent unresolved problems of the economy shall hinder the upcoming growth. Specifically, the Vietnam’s macro economy remains stable, but numerous matters have not been tackled thoroughly, among those are labor productivity, budget deficit and over dependence on foreign direct investment (FDI) sector…
"The dynamics of economic growth isn’t fueled by increasing productivity. That of Vietnam remains low compared to other neighborhood countries, only equivalent to a quarter of Singapore, one-sixth of Malaysia and one-third of Thailand," stated in VEPR’s report.
The research team warns, without comprehensive measures to enhance labor productivity in short term while the ideal population structure is about to pass, Vietnam will get challenge to maintain the current growth trend.
Regarding to labor productivity issues, economist Truong Dinh Tuyen said that Vietnam's improved labor productivity would depend on the shift between low-productivity industries to high-productivity and intra-industry sectors. However, 2017 witnessed modest results.
Much of the sectoral and intra-industry transference last year was dependent on the foreign-invested enterprises while the private sector still hasn’t advanced much.
"FDI enterprises generates about 50% of industrial production value, 72% of export value and contribute 20% to GDP, which makes up the main contributor to growth and the change in labor productivity while the private sector has hardly changed, " Tuyen stressed.
Referring to this issue, economist Pham Chi Lan said that the development of the private sector must look at two aspects, the new established businesses and the enterprises leaving the market. However, if this is correct, the situation is "more worrisome than worthy of praise."
"The number of newly registered enterprises increases but the number of enterprises leaving the market is still very high," she added that these businesses that have been operating and contributing but is still unable to survive due to pressure from integration.
However, expert Lan also assessed that there were positive changes in each sector, where labor productivity has changed". In the industry, mining has been reduced while processing has increased gradually, and agriculture has also shifted to high-tech agriculture,” Lan added.
Apart from productivity, budget deficit and high public debt continue to be a serious problem hindering the economy. Meanwhile, investment capital remains limited. "In the context of the gradual withdrawal of foreign donors and lending at inpreferential interest rates, Vietnam needs to use more internal resources to drive growth," stated in the report.
Assessing the need to recalculate basing on GDP size, Dr. Nguyen Duc Thanh said that this can create a prospect to expand loan ratio, but the calculation needs to discuss thoroughly.
"The principle of calculating GDP is based on observable and taxable activities, which is used as a basis for debt repayment and capital is calculated basing on GDP". However, if the informal sector is included in the GDP scale, the expansion of loan prospect without carefully considering the revenue will affect the ability to pay", Thanh said.
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