Scientific research

Assessing the ability to achieve the socio-economic development plan in 2019

Update at: 04/07/2019 09:26:00

Socio-economic performance in the first 5 months of 2019

In the first 5 months of the year, along with the downward trend of the global economy, the Vietnamese industrial sectors have showed signals of sluggish growth compared to the same period in 2018. The industrial sector could not maintain an impressive growth as the last year due to a sharp decrease in manufacturing and mining sectors.

The Index of Industrial Production is estimated to increase 9.4% y-o-y in May, lower than the level of 10.3% in 2018. However, this figure is still much higher than 7.4% and 6.6% in 2016 and 2017, respectively. The agriculture, forestry and fishing sector has remained at a stable growth despite facing challenges from African swine fever virus and difficulties in agricultural exports. The service sector has kept its pace thanks to the significant contribution of wholesale and retail industry. Trade, investment and consumption are on rising trend but the momentum has declined compared to the growth in 2018. The number of enterprises returning back to markets has increased. New established businesses tend to increase their capital size. Employment and social security are guaranteed.

Macroeconomy continues to be stable. The average consumer price index has increased 2.7% y-o-y in May and this is the lowest growth of the first 5 months in the last three years. The finance and monetary status are stable. There is a positive result in budget revenues and expenditures.

Prospect of socio-economic development

In the coming months of 2019, Vietnam’s economic growth continues relying on growth of the manufacturing sector and investment. In addition, the motivation of the economy still depends on the private consumption and the improvement of business environment in attracting more social resources to increase manufacturing capacity of the economy. However, in the remaining months of 2019, there are some challenges, namely: (i) Some sectors, which has been creating motivation for growth such as telephone, electronics, will not maintain an impressive growth rate as the previous period, accompanied by a decline in the mining. (ii) Agricultural product exports are supposed to face many difficulties. (iii) High inflation pressure due to many factors, particularly the fluctuation in exchange rates, interest rates, the trend of rising crude oil price on the international market and the requirement of implementing market price roadmap for education and health services. (iv) Slow disbursement of public investment, equitization of SOEs process and investment in localities. (v) The business sector still faces many administrative barriers. The linkages between FDI sector and domestic enterprises are still limited. Under these trends, the overall growth rate of economy is expected at 6.86% y-o-y in 2019 (lower than the level of 7.08% in 2018). Of which, the growth rate of agriculture, forestry and fishing; industry and construction and service sectors are 3.02%; 8.61% and 6.84% respectively. The average consumption index is expected to increase 3.71% y-o-y in 2019 (compared to 3.54% in 2018).

Assessing the ability to achieve the socio-economic development plan in 2019: Comparing to the 2019 socio-economic development plan targets, some key macroeconomic indicators are expected to be achieved or exceeded the targets. Except the indicator of trained workers ratio, which is not feasible due to its low ratio in 2018.

Policy recommendations to boost economic growth in 2019

In order to maintain economic growth as planned, it requires synchronous cooperation among line ministries, especially ministries which play important roles in managing macroeconomy. In addition to solutions which are mentioned in detail in the Resolutions 01 and Resolution 02 dated January 1, 2019 aimed at bolstering economic growth in 2019. Some solutions should be paid more attention: (1) Continue to improve productivity, efficiency and competitiveness of the economy. (2) Promote public investment disbursement. Especially taking advantage of the diversion of FDI investment due to US-China trade war. (3) Strengthen the forecasting and warning activities; proactively prevent and response to trade safeguard measures applied to Vietnam’s exports. Seek opportunities to expand new potential export markets while strengthen and expand market share of Vietnamese goods in traditional markets and markets which are FTA partners (especially with commodities such as textiles, footwear, wood); facilitate export of agricultural, aquatic products to enter new markets. (4) Control inflation on the basis of closely monitoring world oil price movements and calculate the roadmap and scope to further increase the prices of goods and services managed by the State (e.g. healthcare and education services fees). (5) Implement monetary policy in a more prudent way in the context of relatively expanding monetary policies in the past years (with relatively high ratio of M2 and credit over GDP). Avoid promoting economic growth by expanding credit, prioritize the target of stabilizing prices and interest rates. Strive to decrease interest rates in some priority sectors (such as agriculture, and SMEs); closely monitoring consumer credit for real estate and securities.

Author: NCIF
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