GDP growth set to exceed 2019 target

By Ngoc Ha October 11, 2019 | 06:00 pm PT

A worker walks at a coal sorting site in the northern province of Quang Ninh. Photo by AFP/Hoang Dinh Nam. Hoang Dinh Nam / AFP Photo)

GDP growth in 2019 is expected to hit 7.05 percent, topping the 6.6-6.8 percent target set by the National Assembly, analysts say.

Their forecast is based on Vietnam’s 7.31 percent growth in the third quarter, and an expected 7.26 percent growth in the final quarter, according to a macro report released by the Vietnam’s Institute for Economic and Policy Research (VEPR) at a recent conference.

The main drivers of growth in the first 9 months had been manufacturing and processing industries, up 11.37 percent; construction, up 9.56 percent; and mining, up 2.68 percent, according to the report.

Vietnam’s robust figures this year are due to strong growth in the industrial sectors that has offset the decline in the agricultural sector. Growth was particularly strong in the mining industry, especially coal, said Pham The Anh, VEPR chief economist.

However, because growth this year depended heavily on exploitation of natural resources, the quality of growth has fallen, and Vietnam is facing environmental consequences like the recent increase in urban air pollution, he added.

Last month, the Ministry of Natural Resources and Environment said that air pollution levels in Hanoi had reached a 5-year high, while HCMC reported increasing number of patients going to hospitals with respiratory problems due to air pollution.

Growth prospects have also worsened due to the increase of 17.2 percent in the average inventory index compared to the previous year, risking temporary production stagnations or enterprises cutting production, Anh said.

Nevertheless, Vietnam’s exports and competitiveness have been improving, and the country is seeing less dependence on credit to drive growth, said Can Van Luc, economist and director of the BIDV Training and Research Institute.

Between 2016 and 2017, credit accounted for 57 percent of total investment capital in the economy, but in 2018 and the first 9 months of 2019, it only accounted for around 46 percent. This shows that private capital and FDI were becoming more effective investments, allowing credit to be prioritized more towards production and business sectors, he added.