Economy projected to grow faster this year
Economy projected to grow faster this year
The Vietnamese economy will grow at around 6.2 per cent this year, but continues to face a lot of challenges, a seminar heard on Thursday.
Nguyen Xuan Thanh, director of the Fulbright Economics Teaching Program, listed three reasons for why economic growth would speed up this year.
"Manufacturing and construction account for 46 per cent of the GDP and this year the two sectors are expected to grow."
"Weak domestic demand has led to low imports, and has, along with high exports created a trade surplus.
"Public spending increased by 11.5 per cent last year and this will take GDP growth above 6 per cent."
The higher public spending had seen the revival of many stalled projects, he said.
But he said public debt had reached 60 per cent of GDP and warned it would soon reach 65 per cent above which it is not considered safe.
"If Viet Nam continues with its old development model of borrowing for development, public debts would pose a risk, not high inflation or monetary policy."
Pham Chi Lan, a senior economist, said: "Viet Nam grows thanks to high investment and not high productivity. This model should be stopped and changed to boost productivity."
While the economies of most members of ASEAN have moved to the innovation stage, Viet Nam, along with Cambodia, Laos and Myanmar, has not yet been able to move beyond the production productivity stage, according to Lan.
She also called Viet Nam's export structure poor since raw materials and semi-processed goods make up 70 per cent of it. The corresponding figure is 49 per cent for Indonesia and 13 per cent for the Philippines.
"This is a warning ahead of integrating into ASEAN: other countries' products might dominate the Vietnamese market," Lan said.
She pointed out a worrying fact that in 2012 the amount of investment and number of workers in the private sector had fallen to half of 2002 levels.
"If the private sector cannot develop, the economy will not grow."
She said Viet Nam faced hurdles to its efforts to achieve stable growth including poor human resources and slow restructure of the economy.
"In the medium and long terms, Viet Nam still has huge potential to develop with its large population, rapid urbanisation, rising life expectancy and more mobile phones." she said.
