Bright economy dimmed by public debt: report

Jan 17th at 09:08
17-01-2018 09:08:06+07:00

Bright economy dimmed by public debt: report

Viet Nam experienced a relatively stable macroeconomic situation in 2017, in accordance with general global economic trends, but experts warned there will be obstacles to maintaining such momentum in the turbulent environment of 2018, according to a report by the Vietnam Institute for Economic and Policy Research (VEPR).

 

Announced at a workshop on Tuesday by Nguyen Duc Thanh, VEPR’s Director, the independent assessment report affirmed key 2017 economic successes across sectors, mainly due to increases in exports, investment and domestic consumption.

He forecast that Viet Nam’s 2018 economic growth rate will be 6.65 per cent. This is within the 2018 targeted range, as passed by the National Assembly (NA), between 6.5 and 6.7 per cent.

With current favourable conditions maintained, other NA yearly objectives including an export growth rate from 7 to 8 per cent and average consumer price index of 4 per cent are also within reach, said Duc Thanh.

Achievements such as the GDP growth rate of 6.81 per cent, exceeding the National Assembly’ annual target, improvements in the manufacturing and agriculture sectors and recovery of the service sector were also noted.

Speaking at the event, Truong Dinh Tuyen, former industry and trade minister, attributed such macroeconomic stability to the Government’s determination to enact institutional investment environment reforms.

In the same vein, Le Dang Doanh, former Director of the Central Institute for Economic Management (CIEM), said that contrary to inflation forecasts in 2017’s last quarter, the State Bank of Viet Nam’s (SBV) flexible and prudent monetary policy proved to be effective in curbing market prices.

Nonetheless, Doanh warned that the high budget deficit and public debt will continue to seriously hinder the economy. While public investment is still limited, high recurrent expenditures will be a burden on the State budget in 2018, he added.

Prominent economist Vo Tri Thanh commented that monetary policy would continue to be tightened, despite the SBV’s pledges to loosen. Still, stable systematic liquidity facilitates low interbank interest rates.

Meanwhile, economist Nguyen Tri Hieu was convinced that in 2017 the Vietnamese credit sector focused largely on industry and trade, gobbling 78.4 per cent out of total credit. This partly explains the impressive growth in the manufacturing sector as well as in the service sector.

However, he was worried that as the country’s 2017 credit-to-GDP rate was around 135 per cent, higher than other countries with similar levels of development and approaching previous instability levels. He said this could lead to the disruption of the banking system’s financial balance.

Despite positive signs, there remain potential challenges associated with macroeconomic instability in 2018, as many internal and external economic problems have yet to be thoroughly resolved, admitted Thanh.

Economic problems that will remain dead-weight burdens to growth include low labour productivity, diminishing advantage of cheap labour due to the 4.0 industrial revolution’s impact, declining mining output, stagnation in the manufacturing and agricultural sector, increasing budget deficits and public debt.

Dependence on the world economy and the foreign invested sector also creates many major uncertainties for Viet Nam in 2018, relating to geopolitical developments and trade protectionism as well as rapid global technology changes, Thanh concluded.

As such, Tuyen suggested that as the country stops being eligible for official development aid, foreign donors would gradually withdraw and only provide loans at preferential interest rates. Viet Nam would need to utilise internal resources as a motivation for growth.

The Government should take drastic and comprehensive policy measures to tighten recurrent expenditures and improve labour productivity in the context of the current demographic dividend, to sustain the current growth momentum, said Tuyen.

Since 2014, the VEPR’s macroeconomic reports have been published quarterly and annually with support from the Konrad-Adenauer Stiftung (KAS) to discuss trending economic issues and propose potential solutions.

bizhub



NEWS SAME CATEGORY

Viet Nam to get more foreign cruise visitors

Princess Cruises, a five-star premium cruise line, on Tuesday announced that it would bring 80,000 international tourists to Viet Nam this year, 40 per cent more...

Viet Nam, Cambodia develop model border market

The Viet Nam Ministry of Industry and Trade and Cambodia Ministry of Commerce on Tuesday began constructing a model border market in Memot District, Tbaung Khmum...

GSO plans to “measure” informal business sector

The Ministry of Planning and Investment will submit a scheme on informal economic statistics to the Prime Minister for approval this year.

Dong Nai leads in trade surplus

The southeastern province of Dong Nai achieved a record trade surplus of US$2.17 billion last year, the highest recorded in the country, according to the provincial...

Kien Giang calls for investment

The 2018 Kien Giang Province investment promotion forum held on Monday was seen as an affirmative undertaking to establish the province’s potential, economic...

PM urges MPI to turn Viet Nam into ’new tiger’ of Asia

Prime Minister Nguyen Xuan Phuc asked the Ministry of Planning and Investment to offer the Government solutions to boost economic development and turn Viet Nam into...

Survey helps HCM City plan policy

The 2017 Economic Survey in HCM City has provided basic data about the number of enterprises, workers, the economic efficiency of companies and administrative units...

VN airlines fight for direct US route

National carrier Vietnam Airlines plans to launch the first direct route between Viet Nam and the United States (US) this year, with the destination being either...

Da Nang hi-tech park offers many sweet deals

State Budget allocation for some infrastructure construction is among preferential policies and regulations that the Prime Minister has approved for the Da Nang...

Can Tho retail revenue hits 100 trillion

Can Tho’s revenue from retail sales and services reached VND106 trillion (US$4.7 billion), 10 per cent higher than 2016, according to Can Tho City’s Department of...


MOST READ


Back To Top