Photo: Duc Anh
First half result puts annual target of 6.7% under pressure.
Vietnam’s GDP may not reach the target of 6.7 per cent this year if no drastic measures are adopted, the National Assembly (NA) has warned.
Speaking at the legislature’s July 11 meeting to review preparatory works for the upcoming session of the new National Assembly, Vice Chairman Phung Quoc Hien said that the economy will struggle to achieve 6.7 per cent growth approved by the NA for 2016 based on the first half result.
GDP has been reported at 5.52 per cent for the first half, much lower than the 6.32 per cent recorded in the same period last year. “The fall is attributed to declines in the growth of the agriculture and mining sectors,” according to reports from the Ministry of Planning and Investment.
“It would be good to achieve 6 per cent,” Minister of Finance Dinh Tien Dung told the NA’s Standing Committee meeting. “It would be better to see 6.3 or 6.5 per cent. But it will be very difficult to reach 6.7 per cent.” If Vietnam does not reach 6.7 per cent it would impact on its budget, particularly in terms of public debt and State budget spending, he noted.
Minister of Planning and Investment Nguyen Chi Dung said that declines in the agriculture sector, the mining industry and exports are the major reasons behind the GDP lagging behind the target in the first half. “Exports have been at their lowest level since 2011,” he said. “Development policies and improvements to the business and investment environment have been accelerated by the government but remain quite low.”
In its latest report on Vietnam’s economy, analysts at HSBC also believe that the slowing in the country’s economic growth in the first and second quarters was disappointing given the fact that the latest data offer further evidence that momentum has improved. “Fortunately, Vietnam continues to receive robust foreign direct investment (FDI) inflows, which should help keep the overall balance of payment (BoP) balance in surplus and facilitate a recovery in foreign exchange (FX) reserves,” the bank’s analysts wrote in its report released on July 11.
Disbursed FDI hit $7.3 billion year-to-date in June, marking a 15.1 per cent year-on-year increase. “With new factories commencing operations this year, we expect FDI to drive further gains in Vietnam's global export market share, allowing shipments to continue growing at a high-single digit pace even as global demand slows,” the report said.
Upcoming risks for the economy, according to HSBC analysts, include foreign reserve levels remaining light to protect against unanticipated event risk. According to the latest International Monetary Fund (IMF) data, Vietnam's foreign exchange reserves had fallen to $27.9 billion, or two months of imports, as at end-2015.
“Based on available trade and portfolio data as well as onshore media reports, we believe reserves may have recovered to around $33.6 billion (2.5 months of imports) in the first quarter of 2016,” HSBC analyst wrote. “However, these are still low levels, especially in the context of RMB [Chinese Renminbi] volatility risks, which could put pressure on the VND.”
HSBC analysts, therefore, have kept their 2016 and 2017 GDP forecasts for Vietnam unchanged at 6.3 per cent and 6.6 per cent, respectively.
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 the voting for key leadership positions, including President, Prime Minister and Chairman of the NA, among others.
The current NA Chairwoman is Ms. Nguyen Thi Kim Ngan, the State President Mr. Tran Dai Quang, and the Prime Minister Mr. Nguyen Xuan Phuc. Ms. Ngan was previously Vice Chairwoman, Mr. Quang was Minister of Public Security, and Mr. Phuc was a Deputy Prime Minister.