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VEPR: Issues for economy in 2018

Released at: 16:24, 17/01/2018

VEPR: Issues for economy in 2018

Photo: Ngoc Lan

Vietnam Center for Economic and Policy Research releases latest report on January 16, highlighting issues for continued economic development.

by Ngoc Lan

Many economic problems are yet to be resolved thoroughly and will remain challenging this year, according to a report released by the Vietnam Center for Economic and Policy Research (VEPR) on January 16.

Economic growth is not being driven by rising workplace productivity, it stated, which is still low compared to regional countries and only one-fourteenth of Singapore’s, one-sixth of Malaysia’s, and one-third of Thailand’s.

If comprehensive measures to boost workplace productivity are not adopted in the near future, given Vietnam’s “golden population structure”, it is unlikely that the country will be able to maintain its current growth momentum.

Advantages in cheap labor will also increasingly disappear due to the impact of the fourth industrial revolution (Industry 4.0).

In the context of resources being depleted, the report noted, mining production continues to decline, while manufacturing has not created any new breakthroughs and agriculture continues to grapple with risks posed by climate change. Growth pressure in 2018 may well be a major challenge.

The report also noted that high budget deficits and public debt continue to be serious issues hindering the economy. While public investment remains limited, recurrent expenditure remains high, placing a burden on the State budget.

Given that Vietnam has moved on from ODA loans, foreign donors will gradually withdraw and only provide loans at preferential interest rates, meaning the country will need more internal resources for growth.

The government also needs to take drastic measures to tighten recurrent expenditures, such as introducing policies to reduce public service staffing, rearranging the State apparatus, limiting spending by organizations, and divesting from State-owned enterprises (SOEs).

Finally, a dependence on the global economy and the foreign invested sector also creates uncertainties in the economy, especially in the context of the global economy facing a host of uncertainties this year relating to geopolitics and the tendency towards trade protection in some major countries and rapid changes in science and technology around the world

Dr. Le Dang Doanh, former Director of the Central Institute for Economic Management, told the January 16 workshop releasing the report, entitled “Quarterly Report - Independent Assessment of Vietnam’s Macroeconomic Policies”, that Vietnam needs to look directly at the fact that the contribution by the domestic economy is low and economic growth is based too much on foreign investment. “We also need to pay attention to the problem of localization of industrial products being very low,” he added. “2018 is a year of integration, with free trade agreements being implemented and, consequently, tariffs on imports into Vietnam falling to 0 per cent, which puts great pressure on the State budget.”

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