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GDP unlikely to reach 6.7% target

Released at: 15:18, 15/07/2016

GDP unlikely to reach 6.7% target

Photo: Duc Anh

Report from Vietnam Institute for Economic and Policy Research claims low second quarter growth can only be turned around by strong measures in the second half.

by Duy Anh-Hung Khanh

Vietnam’s GDP in 2016 will not reach the targeted 6.7 per cent unless breakthrough measures are introduced, according to analysis from the Vietnam Institute for Economic and Policy Research (VEPR).

Mr. Nguyen Duc Thanh from the independent think tank told a press briefing on the release of the Vietnam Quarterly Macro-Economic Report on July 14 that Vietnam’s economy needs continued momentum and stimulus from authorities to achieve the GDP target.

GDP stood at 5.52 per cent in the second quarter, almost the same as the 5.48 per cent recorded in the first quarter, according to the General Statistics Office (GSO).

“GDP growth has not been what we expected, as the figure for the second quarter is traditionally 0.25 to 0.5 per cent higher than in the first quarter,” Mr. Thanh said.

In the first quarter of 2015 GDP was 5.46 per cent before rising to 6.44 per cent in the second quarter. “Based on results in the first half of this year, a figure of 6 per cent in the second half would be considered a success,” he added.

In VEPR’s report its analysts wrote that the GDP target of 6.7 per cent for 2016 will only be achieved with major breakthroughs in reforms, which would provide strong stimulus to consumption sentiment and create confidence among investors, both private and foreign. “However, this is unlikely to happen,” the report concluded.

The downturn in Vietnam’s mining industry is largely responsible for the disappointing GDP growth in the second quarter, it continues. China, the main destination for steel exports, is experiencing lower demand and the steel price has tumbled by 30 to 50 per cent since 2014.

This has significantly affected the industry sector’s growth rate, which was just 6.82 per cent in the second quarter, or much lower than in the first quarter and the fourth quarter of 2015.

Meanwhile, according to the Deputy Head of the Ministry of Finance’s Market and Price Research Institute, Mr. Vu Dinh Anh, “GDP growth is always higher in the second half of the year compared to the first half.” This is when investment projects normally get underway, he explained.

GDP in the third quarter of 2015 reached 6.81 per cent and 7.01 per cent in the fourth quarter, according to GSO figures. Mr. Anh, however, believes that while GDP will increase “it is very unlikely to reach the 6.7 per cent planned for 2016.”

The government and the National Assembly (NA) reaffirmed on July 12 that they would not adjust the target. NA Chairwoman Nguyen Thi Kim Ngan told a meeting of the NA’s Standing Committee on July 11 that the legislature agreed with the government that the GDP target should not be adjusted. “But the government must have detailed measures to achieve the target,” she said.

The new NA for the 2016-2021 tenure will gather for its first session on July 20, which is expected to last for ten days. High on the agenda is voting for key leadership positions, including President, Prime Minister and Chair of the NA, among others.

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