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Vietnam Today

VEPR forecasts 2016 growth at 6%

Released at: 08:18, 12/10/2016

VEPR forecasts 2016 growth at 6%

Vietnam Institute for Economic and Policy Research believes caution needs to be exercised by the government when setting growth targets.

by Hung Nguyen

Vietnam’s GDP growth in 2016 will be 6 per cent and the government should be more cautious when setting growth targets, according to analysts at the Vietnam Institute for Economic and Policy Research (VEPR).

Mr. Nguyen Duc Thanh from the independent think tank told a press conference on October 11 to release its Vietnam Quarterly Macro-Economic Report that growth of 6 per cent is lower than the government’s target set at the beginning of the year of 6.7 per cent, which was then reduced to 6.3-6.5 per cent.

“The budget deficit is over the ceiling of 50 per cent of GDP, public debt remains a problem, and economic recovery as is not as strong as expected,” Mr. Thanh said. “The government should therefore learn lessons about setting high growth targets as budget spending remains the same as planned.”  

GDP stood at 6.4 per cent in the third quarter, up sharply over the 5.78 per cent recorded in the second quarter and 5.48 per cent in the first quarter, according to the General Statistics Office (GSO). It put the slow growth down to poor performances in the agriculture and mining sectors.

Vietnam’s growth is still “impressive”, according to economic expert Truong Dinh Tuyen. The new government target of 6.3-6.5 per cent, however, still faces great challenges.

“The best GDP growth Vietnam can reach for in 2016 is 6.0-6.2 per cent,” Mr. Tuyen acknowledged. Other than agriculture and mining, the most important matter is how to handle bad debts after the financial crisis and real estate bubble in the 2007-2009 period.

“Bad debts have not fallen and are instead increasing, with greater risk coming from infrastructure projects in the build-operate-transfer (BOT) mode, where builders depend greatly on bank financing,” Mr. Tuyen added.

The banking sector is likely to handle bad debts by itself without using their own profits to set aside provisions, but this method is inefficient and may weaken the national economy, according to Mr. Thanh.

“It needs to use real money to improve the bad debt situation, as seen with Japan using State budget funds and Indonesia borrowing from the IMF,” Mr. Tuyen said.

The VEPR report also pointed to international factors creating “uncertainty”, including falling raw material prices and oil prices. “Vietnam as an economy dependent upon exports and is influenced by recent events in the EU and the US, China and Japan,” Mr. Tuyen said.

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