GDP Vietnam forecasted to achieve 7 percent annual growth in 2021 – 2025

The seminar “Vietnam economy perspectives for 2021 – 2025: opportunities and challenges from new generation free trade agreements”. Photo: H.Dịu

Speaking at the seminar, Dr. Tran Thi Hong Minh, General Director of NCIF, Ministry of planning and investment said that, through the research of NCIF, new generation free trade agreements, especially the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the European Union – Vietnam Free Trade Agreement (EVFTA) would have a significant impact on Vietnam’s economy in 2021 – 2025.

The EVFTA could even cause greater impact than the CPTPP because the CPTPP has many members participateingin other FTAs with Vietnam.

The EVFTA and CPTPP agreements could help Vietnam’s GDP increase by 4.3 percent and 1.3 percent respectively by 2030. Vietnam's export turnover to the EU by 2030 is expected to increase by 44.4 percent; exports to member countries in the CPTPP in 2035 could increase 14.3 percent.

Besides that, according to Minh, the positive impact from the agreements could also come from the pressure to improve institutions and the business environment, thus it is expected to create positive impacts in the medium and long-term.

Commenting on economic growth in 2016-2020, the NCIF said the growth model has not had a clear change, the growth was still largely dependent on capital (investment/GDP ratio is still high, average 33.5 percent). The contribution of capital factors in growth still accounts for a large proportion (more than 55 percent). The economic structure has shifted too quickly into the service sector while the industrial foundation was still weak. Supporting industry was underdeveloped and processing was still large. The services industry, which contributed high value, was still low, and logistics costs were still high. Exports were still dependant on goods led by FDI enterprises. Export turnover increased but the domestic content of exports did not increase correspondingly.

On that basis, the NCIF built two scenarios of economic growth forecast for 2021-2025. Accordingly, with more possibilities, Vietnam's GDP growth rate would reach about 7 percent/year in 2021-2025; basically, the macroeconomy would stability, inflation would be 3.5-4.5 percent per year. Labour productivity would improve with a growth rate of about 6.3 percent per year.

In another scenario, if Vietnam could take advantage of the technology in the Fourth Industrial Revolution and attract investment with the improvement in quality, developing the current economic foundation,GDP would grow by 7.5 percent/year.

According to Tran Toan Thang, Director of the Enterprise and Market Information Department, NCIF, Vietnam could quickly improve its competitiveness in terms of market scale and labour, but core indicators like infrastructure, creativity and technology readiness were concerns and time-consuming.

Therefore, this expert recommended that three core issues in the near future would be: Enhancing the internal capacity of the economy; reforming growth models, promoting the increase of new growth engines; effectively take advantage of opportunities from international integration, from the development trend of science and technology and the fourth industrial revolution.

Therefore, it is needed to accelerate the process of institutional reform and environmental improvement; strongly promote the development of the private sector; promoted the development of science and technology, innovation and increase labour productivity and make the most of the "catch up" benefits of the fourth industrial revolution to develop in-depth manufacturing industries.