Vietnam GDP growth to expand by over 6% in 2021: VEPR

Vietnam could reach an economic growth in range of 6-6.3% in case the Covid-19 pandemic is fully contained domestically and the global economy returns to its upward trend.

Chief Economist of the Vietnam Institute for Economic and Policy Research (VEPR) Pham The Anh gave the remarks at the launch of its quarterly macro-economic report on April 20.

Overview of the conference. Photo: Hai Yen

“Strong trade performance as a result of a number of free trade agreements that Vietnam is a part of, wave of investment shift to disperse risks from US -China trade war, effective public investment and stable macroeconomic environment are factors that would support the country’s GDP growth this year,” stated Anh.

Meanwhile, the VEPR’s economist pointed out the fact that Vietnam is facing many risks and challenges in an unstable world economic environment.

“The resurgence of Covid-19 in countries around the world and the subsequent lockdown measures could extend the disruption of supply chain this year,” said Anh, noting geopolitical conflicts between large countries can put an open economy like Vietnam into a disadvantageous situation.

Besides, the weakness of Vietnam's economy also comes from internal issues such as high fiscal deficit, low development investment budget; the insufficiently improved health of the banking - financial system; the heavy dependence of growth on the FDI sector; low labor quality; and the stagnated privatization process of SOEs.

Economist Can Van Luc, however, gave a more positive outlook by saying the country’s GDP   could grow 6.5-7% for 2021.

“This, however, is no small task, as Vietnam would be required to achieve a growth rate of 7.3-7.4% in the second quarter, and 6.3-6.8% in the third and fourth quarter,” Luc stated.

According to Luc, Vietnam is among countries that could benefit from US’s US$1.9 trillion stimulus package.

“In case the US can fully disburse the entire amount, Vietnam’s GDP could expand by an addition of 0.76 percentage points,” he asserted.

In the meantime, agriculture, exports and FDI inflows would continue to be the three major driving forces for economic development, Luc said.

As countries around the world, including Vietnam, are adopting monetary easing policy to aid economic growth, Luc expected inflationary pressure continues to be a long-term issue.

Shoppers at a Hapro's supermarket. Photo: Thanh Hai

“Overacting against inflation is not necessary, however, as it may delay the process of economic recovery,” Luc warned, adding he predicts inflation to be 3.5-3.7% this year, lower than the government’s target of 4%.

Both two economists agreed the government’s priorities should be to ensure social security, keep the macroeconomic environment stable, and support operational businesses.

In all situations, inflation, interest rates, and exchange rates need to be maintained stably, to secure the foundation for economic recovery after the pandemic.

VEPR’s report suggested the necessity to diversify export/import markets to avoid heavy dependence on some major economic partners.

As Vietnam is looking to move on despite the pandemic, the report called for a fiscal buffer to be gradually built to prevent future shocks.