Economy continues to face difficulties in 2017

2016 was a successful year of the Government and Ministries, and Branches in operating policies. Photo: Nguyen Ha.

The bright points

According to the statistics from the General Department of Statistics, the gross domestic product (GDP) rose 6.21% in 2016 compared to 2015, in which, the first quarter rose 5.48%, the second quarter rose 5.78%, the third quarter rose 6.56%, the fourth quarter rose 6.68%. Commenting on this growth, Mr. Nguyen Bich Lam, the General Director of the Statistics Department said that the growth rate was lower than the growth of 6.68% in 2015, and we did not reach the recommended growth target of 6.7%, but in the context of the world economy, the domestic economy faced many difficulties because of weather, and the marine environment. The above growth achievement was a success, that confirmed correctness, timeliness, effectiveness of the measures enacted and directed by the Government.

In the 6.21% growth rate of the whole economy, the agriculture, forestry and fisheries increased by 1.36%, the lowest increase since 2011, contributed 0.22 percentage points to the general increase rate. The industrial sector and the construction sector increased by 7.06% over the previous year, including the processing and manufacturing industry grew highly by 11.9%, contributed significantly to the general growth rate. The mining sector had the biggest decline to 4%, which is also the sharpest drop since 2011.

Although the GDP growth rate did not reach the expected goal, Mr. Ha Quang Tuyen, the Head of the National Account System Department (the General Department of Statistics) assessed, this was the first time the Vietnam's economic growth increased without depending on the natural resource exploitation. In addition, he also raised some bright points of the economy in 2016, such as: the trade surplus of goods came back, reached $US 2.68 billion, while the trade deficit was $US 3.6 billion in 2015; the conduct of monetary policy, exchange rate was positive and stable, so the foreign exchange reserves was a record increase in the past year; 2016 was the record year with 110,100 new businesses registered for establishment; the number of tourists into Vietnam reached a record with 10 million visitors.

Notably, 2016 was considered a successful year in controlling inflation when prices of some essential commodities rebounded but we still facilitated to adjust the prices of some items managed by the State descend asymptotically the market prices. The average monthly consumer price index (CPI) of 2016 rose 0.4%; The average CPI of 2016 increased by 2.66% compared to 2015; CPI of December 2016 rose 4.74% compared to December 2015, lower than the recommended target of 5% of the National Assembly.

Thus, in the context of the world economy as well as the domestic economy met many difficulties, Vietnam's economy still had growth. 2016 was a successful year of the Government and the Ministries, Branches in operating policies.

Challenges of controlling inflation in 2017

In 2017, the National Assembly set a target of 6.7% GDP growth, 4% of inflation. However, according to Mr. Lam, the inflation control target of 4% was a challenge in the unpredictable fluctuation context of our country's economy and the region economy. For example, in December, the Federal Reserve (Fed) raised interest rates for the US dollar which affected foreign directed investment, affected the exchange rate, led to inflation. According to calculations of the General Department of Statistics, the CPI of December rose 4.74%, the average monthly CPI rose 0.4%, but with 4% of inflation target in 2017, the average monthly CPI will only rise 0.2%. This is a big challenge.

Besides, the growth of 6.7% is also a difficult target when the world economy is not favorable, even international organizations have recognized that growth in 2017 would be lower than in 2016. Not to mention, Vietnam's economy has large a aperture - which depends heavily on world demand, while many countries use the trade protection policies to protect their domestic economy, so that, this is a big challenge for Vietnam. On the other hand, climate change will continue to affect the Vietnam's economy, especially in the agricultural sector.

Therefore, to achieve these objectives, the Government, the Ministries, Branches must care about how to issue solutions timely. Mr. Lam proposed to the Ministry of Finance, the Ministry of Industry and Trade, the Ministry of Planning and Investment (the General Department of Statistics), the State Bank of Vietnam should take the initiative and cooperate closely in evaluating of the price situation, building price operation plans (the price of medical services, education services, electricity and water), interest rates and exchange rates to control inflation initiatively.

For both fuel and electrical goods, the Ministry of Industry and Trade and the Ministry of Finance should monitor changes in world oil prices, use the petrol price stabilization fund appropriately to limit price increase of these commodities for the general CPI.

The Ministry of Industry and Trade launched initiatively plans to raise electricity prices to calculate the influence degrees on the CPI, the production price index and GDP growth.

The General Department of Statistics also proposed, for goods of medical services, education services, the Ministry of Health, the Ministry of Education and Training should be in collaboration with the other Ministries, Branches forecast the impact factors for CPI in 2017 to be able to adjust the price of medical services, and education services under the roadmap in the provinces and cities directly under the Central Government to reduce the ripple effect on the CPI; at the same time, the State Bank of Vietnam should operate to stabilize interest and exchange rates, keep basic inflation around 2%.

“We also recommend the implementation in the price adjustment times for goods of medical services, education services must coincide with the adjustment times in 2016, that will restrict increase of the average annual index; adjustment implementation time for the price of goods controlled by the State should separate at different months to minimize the ripple effect on the CPI”, Mr. Lam stressed.