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Economy 2018 - Focus on quality growth

Just over two months to come to an end of 2017 and the first basic features of the 2018 economic picture have just been reported by the Government to the Standing Committee of the National Assembly. 

 

With the targets set in the plan for socio-economic development in 2018, it is easy to see that the Government has not put too much emphasis on economic growth in terms of quantity but instead that is to ensure the quality of growth.

GDP growth of 6.5-6.7%

By the end of the third quarter of 2017, the economic growth target of 6.7% has been confirmed by many ministries and sectors. This is a great effort of the Government in the context of the economy is transforming the growth model, gradually reduced based on exploitation of resources, especially crude oil and shifted to the processing industry, manufacturing and service to be the core. In 2018, economic growth targets set in the context of deep international economic integration, optimistic prospects for economic growth and global trade in 2018 will create the favorable conditions to promote economic growth and export of Vietnam, especially when making good use of the opportunities of signed trade agreements.

Along with the economic growth in the third quarter of 2017, it is common sense that the 2018 growth target will be revised up to ensure that the GDP growth target for the 2016-2020 period is 6.5- 7%, while in 2016 GDP growth has not reached its target (6.21%). However, the socio-economic picture in 2018 has been drafted by the Government with relatively modest basic objectives. Accordingly, GDP growth target is set at an increase of about 6.5-6.7%, not higher than the GDP growth of 2017. Total export turnover increased about 7-8% compared to 2017, the trade deficit is less than 3% of total export turnover. The total development investment capital of the whole society accounts for 33-34% of GDP and the CPI growth rate is about 4%.

Along with these basic criteria, the major balances of the economy have also been identified. Accordingly, the total state budget revenue in 2018 is expected to be about 1.3 million billion, the total state budget expenditure in 2018 is estimated at 1.5 million billion VND, the budget deficit in 2018 estimated at 420 trillion VND (about 3.7% of GDP). On balancing development investment capital, it is estimated that the total investment capital of the whole society in 2018 is about 1.9 trillion dong, equivalent to 33-34% of GDP. In particular, foreign investment in 2018 is expected to total 27.5-28.5 billion USD.

Regarding import-export balance, the export of goods in 2018 is expected to reach 216-218 billion USD, increasing by 7-8% over 2017; About 221-223 billion USD, increased about 8-9%. The trade deficit was estimated at 5 billion USD and the trade deficit compared to export turnover remained below 3%.

It is said that the basic target is relatively modest because, besides GDP is expected to increase only about 6.5-6.7%, the total export turnover is expected to increase about 7-8% compared to 2017. Meanwhile, in the first nine months of 2017, according to the specific assessment of the implementation of the main targets in 2017, there are 5/13 norms in excess of the norm, in which the growth rate of total export turnover reached over 14% , while the target is 6-7%.

Explaining a part of this, the Government said that the international situation is forecasted to be unpredictable, Vietnam's economy may face many difficulties and challenges from the outside. At the same time, Vietnam's main challenge comes from the internal factors of the economy such as: economic model mainly based on cheap labor, low technology level; land, natural resources are gradually exhausted, while the efficiency of use has not increased significantly. Along with these are outstanding issues of bad debts, public debts, restructuring of branches and domains; Domestic enterprises are still limited in terms of size and capacity to operate.

Quality growth is top priority

In addition to these shortcomings, the Government also said that there are new difficulties may appear to reduce growth in 2018. Specifically, the growth drivers based on factors such as oil and gas exploitation, coal, contributions from Samsung, Formosa, remittances, etc., have all been leveraged in 2017 and are unlikely to increase. In the coming time, the mining sector may continue to decline due to declining mining output, especially crude oil production, which is expected to drop by 2 million tons compared to 2017. The tightening of monetary and monetary policy, the ability to raise capital for development investment is likely to be difficult as it has experienced the peak of growth in 2017; import tax on some items in ASEAN decreased etc. All the above negative factors will greatly affect the objectives and tasks set for 2018.

Prior to the information that the Government does not set a target for GDP growth in 2018 higher than 2017, economist Le Dang Doanh highly appreciated the Government's proposal because besides defining the plan, the ability to achieve is also very important and with the current economic situation, the ability to achieve high growth is difficult. "If high growth at any price can be expected to pay for the injection of money into the economy, the potential for inflation is likely to happen. Having a higher target is good, but should not be too high. Therefore, the government's target GDP growth is equal to and lower than 2018, in my opinion is realistic", said expert Le Dang Doanh.

Economic expert Nguyen Tri Hieu said that he was "not surprised when the government set a growth target no higher than the growth rate of 2017, because the government has predicted that it will reduce its economic growth target". According to the expert, pushing up the growth target to a high level requires that the economy be warmed up. For example, in the second half of 2017, the Government asked the State Bank to inject a large amount of credit into the economy with the growth rate set for the whole year rising from 18 to 21%. Thus, the push for higher economic growth will affect monetary policy, push the monetary policy more powerful than usual. Welcoming the Government's target of GDP growth of 6.5-6.7% for 2018, expert Nguyen Tri Hieu said that it would ease the pressure on monetary policy. "However, no matter what the growth rate is, the quantification of economic growth is not the only indicator, the problem that people want is the quality of growth must put on the top, that is quality life of the people must be increased, the liquidity of enterprises must be improved", expert Nguyen Tri Hieu noted.

Many comments also said that considering reducing the growth target could be a step backward so that the government has time to focus on the quality of growth. In order to achieve GDP growth of 6.5-6.7%, the government needs to speed up reforms, because now the costs that private firms are suffering are huge. Additional expenses. The reform is also to ensure a mechanism does not create corruption, the responsibility must be clear.

In order to accelerate the growth of 2018, the head of the National Assembly's Economic Committee Vu Hong Thanh said that the Government, ministries, sectors and localities should be determined to implement the budget constraint. To tighten investment projects, promote administrative package expenditures, use public vehicles, bidding, order in public service provision, reduce state budget overspending, and public debt management. In addition, it is necessary to strengthen the administrative discipline in the implementation of public affairs, create the most favorable conditions for investment and business activities and protect the legitimate interests of investors; Remove barriers, business investment conditions unreasonable, obstructing the operation of enterprises

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