With GDP and FDI up and inflation at a 14-year low there's much for Vietnam to celebrate economic-wise as the year comes to a close.
The General Statistics Office (GSO) has reported that inflation in 2015 increased by its lowest level for 14 years, at 0.63 per cent, and GDP growth was at its highest for five years, at 6.68 per cent. The figures confirm that Vietnam’s economy has regained momentum after a few difficult years.
According to Mr. Nguyen Bich Lam, Director General of the GSO, the macro-economic situation continued to be stable, the business confidence index rose substantially, and major sectors saw impressive growth. “These are important factors contributing to the high GDP growth rate,” he said.
The report showed that the price of most raw materials for production and consumption was stable and at low levels, creating sound conditions for production and the socio-economy.
“Stable prices resulted in sales by enterprises increasing, while aggregate demand in the population and the government also rose, stimulating production,” Mr. Lam said. “Higher aggregate demand will support sustainable growth.”
Foreign direct investment (FDI), meanwhile, also continued to its upwards trajectory, reaching $22.76 billion for the year, up 12.5 per cent against 2014. Disbursement stood at $14.5 billion, an increase of 17.4 per cent year-on-year. Increases to both newly-registered capital and disbursement are evidence that Vietnam’s investment environment has improved.
The number of new enterprises was at a record high, at 94,754, with total registered capital of VND601 trillion ($27 billion), up 26.6 per cent 39.1 per cent, respectively.
Mr. Pham Dinh Thuy, Director of the Industrial Statistics Department at the GSO, said that economic growth in 2015 was driven by the industrial sector, which increased 9.64 per cent compared to 6.42 per cent in 2014 and comfortably exceeded growth in other major sectors, such as services, which rose 6.33 per cent, and agriculture 2.41 per cent.
A survey on business trends among enterprises in manufacturing and processing conducted in the fourth quarter of 2015 showed a clear recovery in underway. Nearly 45 per cent of respondents said production for the year increased much higher than in 2014 and they expect this to continue in the first quarter of the new year.
The economy, however, still has many shortcomings in need of resolution. Total exports reached more than $162 billion, up 8.1 per cent compared with 2014 but lower that the target of 10 per cent. The main causes were the tumbling global crude oil price, pressure on the exchange rate, and the exports of domestic firms remaining weak, leading to an overall trade deficit.
Mr. Lam predicted that 2016 will be more difficult than favorable. The impact of many free trade agreements reducing tariffs to zero will increase imports and domestic competition will be tougher. Deeper integration will make the economy much more exposed to global economic factors.
The country’s exchange rate policy operated in a relatively flexible manner during the year but is under pressure from external factors, such as the possibility the US Federal Reserve many increase interest rates. Mr. Lam, therefore, said it is necessary for Vietnam to be proactive and flexible in policy matters to overcome the difficulties.
- Nguyen Bich Lam